This HTML version is machine-generated. Always consult the original document.

INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES

CONOCOPHILLIPS PETROZUATA B.V., CONOCOPHILLIPS HAMACA B.V. AND
CONOCOPHILLIPS GULF OF PARIA B.V.

Respondents on Annulment

and

BOLIVARIAN REPUBLIC OF VENEZUELA

Applicant on Annulment

ICSID Case No. ARB/07/30
Annulment Proceeding

DECISION ON ANNULMENT

Members of the ad hoc Committee
Judge Dominique Hascher, President
Prof. Diego P. Fernández Arroyo, Member
Prof. Lawrence Boo, Member

Secretary of the ad hoc Committee
Ms. Celeste E. Salinas Quero

Date of dispatch to the Parties: 22 January 2025

[Page i]

REPRESENTATION OF THE PARTIES

[Page ii]

[Page iii]

[Page xi]

TABLE OF ABBREVIATIONS/DEFINED TERMS

[Page xii]

[Page 1]

I. INTRODUCTION AND PARTIES

1. This proceeding concerns an application for annulment (the “Application”) of the award rendered on 8 March 2019, in the arbitration proceeding between ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. and the Bolivarian Republic of Venezuela (ICSID Case No. ARB/07/30) (the “Award”) rendered by a Tribunal composed of Mr. Eduardo Zuleta, Mr. L. Yves Fortier and Mr. Andreas Bucher. This Decision will use the “Claimants” or “Conoco,” or the "Conoco Parties" or the “Respondents on Annulment” to refer to ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V. and the “Applicant” or “Venezuela” or the “Republic” or the “Respondent” for the Republic of Venezuela. The Conoco Parties and Venezuela are collectively referred to as the “Parties.” The Parties' representatives and their addresses are listed above on page (i). This Decision will also refer to the separate law firms that hold themselves as the Respondent's representatives, namely the law firm of Curtis, Mallet-Prevost, Colt & Mosle LLP (“Curtis”) on behalf of the Bolivarian Republic of Venezuela and the law firm De Jesús & De Jesús (“De Jesús”), to distinguish the respective filings submitted by each.

2. The Award decided on a dispute submitted to the International Centre for Settlement of Investment Disputes (“ICSID” or the “Centre”) on the basis of the Agreement on encouragement and reciprocal protection of investments between the Republic of Venezuela and the Kingdom of the Netherlands which entered into force on 1 November 1993 (the “BIT” or “Treaty”) and the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, which entered into force on 14 October 1966 (the “ICSID Convention").

3. The dispute in the arbitration proceeding related to the interests of the Claimants in two extra-heavy oil projects located in Venezuela's Orinoco Oil Belt region (Faja Petrolífera del Orinoco) — the “Petrozuata Project” and the “Hamaca Project” (the "Upgrading Projects”), and in an offshore project for the extraction of light to medium

[Page 2]

crude oil - the “Corocoro Project” and the subsequent various measures taken by the Respondent.

4. On 3 September 2013, the Tribunal issued by majority its Decision on Jurisdiction and the Merits. The Tribunal found that the Respondent “breached its obligation to negotiate in good faith for compensation ... on the basis of market value as required by Article 6(c) of the [Netherlands-Venezuela] BIT”. On 8 March 2019, the Tribunal issues its Award, ordering the Respondent to pay ca. US$ 8.7 billion for damages and US$ 20.4 million to defray Conoco's arbitration costs.

5. The Respondent applied for annulment of the Award on the basis of Article 52(1) of the ICSID Convention, identifying four grounds for annulment: (i) the Tribunal was not properly constituted (Article 52(1)(a)); (ii) manifest excess of powers (Article 52(1)(b)); (iii) serious departure from a fundamental rule of procedure (Article 52(1)(d)); and (iv) failure to state reasons (Article 52(1)(e)).

II. PROCEDURAL HISTORY

6. On 27 November 2019, ICSID received an Application for Annulment of the Award (the "November 27 Application”). Mr. George Kahale, from the law firm Curtis submitted the November 27 Application on behalf of the Bolivarian Republic of Venezuela. On 5 December 2019, ICSID received an “Application for Annulment” of the same Award (the “December 5 Application”). Dr. Alfredo De Jesús O., from the law firm De Jesús & De Jesús submitted the 6 December Application, also on behalf of the Bolivarian Republic of Venezuela. Both applications also contained a request under Convention Article 52(5) and Rule 54(1) of the ICSID Rules of Procedure for Arbitration Proceedings (the “ICSID Arbitration Rules”) for the stay of enforcement of the Awards until the Application was decided (the “Request for Stay").

7. On 16 December 2019, pursuant to Arbitration Rule 50(2), the Secretary-General of ICSID registered the Application. On the same date, in accordance with Arbitration Rule 54(2), the Secretary-General informed the Parties that the enforcement of the Award had been provisionally stayed.

[Page 3]

8. In the Applications, the Respondent requested “that the Chairman of the Administrative Council of ICSID seek the recommendation of the President of the International Court of Justice with respect to the appointment of the three members of the ad hoc Committee." On 17 January 2020, ICSID wrote to the Parties notifying them that (i) "[t]he authority to appoint the members of an ad hoc Committee under the ICSID Convention falls on the Chairman of the Administrative Council. Accordingly, the Chairman will not seek a recommendation from the President of the International Court of Justice" and (ii) the Chairman intended to appoint Judge Dominique Hascher, Prof. Diego Fernández Arroyo, and Mr. Kap-You Kim to the ad hoc Committee.

9. On 3 February 2020, in accordance with Rules 6 and 53 of the ICSID Arbitration Rules, the Parties were notified that an ad hoc Committee composed of Judge Dominique Hascher, a national of the Republic of France, and designated as President of the Committee, Professor Diego Fernández Arroyo, a national of Argentine Republic and the Kingdom of Spain and Mr. Kap-You Kim, a national of the Republic of Korea, had been constituted (the “Committee”). On the same date, the Parties were notified that Francisco Grob Duhalde, Legal Counsel, ICSID, would serve as Secretary of the ad hoc Committee.

10. On 20 February 2020, the Secretary of the Committee circulated a draft procedural order to the Parties in preparation for the first session and the preliminary procedural consultation referred to in Arbitration Rules 13 and 20, respectively.

11. On 25 February 2020, the Committee advised the Parties that the first session and the preliminary procedural consultation would be held with the Parties by telephone conference on 25 March 2020.

12. On 2 March 2020, De Jesús, Curtis and the Claimants confirmed their availability on the proposed dates.

13. On 13 March 2020, De Jesús and Claimants submitted their comments and proposals on the draft procedural order circulated on 20 February 2020 and provided their

[Page 4]

availability. Curtis submitted its comments on 14 March 2020 along with its availability.

14. Following receipt of the Parties' observations on the Committee's communication of 25 February 2020, and in view of the Parties' availability, the Secretary of the Committee informed the Parties on 19 March 2020, that the Committee had decided to separate the first session from the preliminary procedural consultation and that it would hold the first session on 25 March 2020, only among its Members. The consultation on procedural matters would proceed in writing; however, the Parties would have the opportunity to present their views in an oral hearing scheduled for 17 April 2020, to be held by videoconference. In this regard, the Committee asked the Parties for their views on holding the hearing only in English.

15. In accordance with ICSID Arbitration Rules 53 and 13(1), the Committee held a first session on 25 March 2020, without the presence of the Parties.

16. On the same date, in response to the Committee's communication of 19 March 2020, counsel for the Respondent as represented by Curtis responded that they had no objection to holding the 17 April hearing only in English. Counsel for the Respondent as represented by De Jesús asked the Committee to consider whether a hearing was necessary “given the nature of the issues pending for decision before the Committee and in light of the public health crisis.”

17. On 30 March 2020, the Claimants wrote to the Committee in response to the Respondent's (as represented by De Jesús) request that the hearing be cancelled, asking that the hearing go forward via teleconference rather than videoconference, if necessary.

18. On 3 April 2020, the Committee wrote to the Parties informing them that the 17 April hearing would go on as scheduled and requested an agreed protocol for the hearing and the Parties' views on the Draft Order circulated on 20 February 2020, by 10 April 2020.

19. On 10 April 2020, Curtis, De Jesús and the Claimants each submitted their respective views on the Draft Order.

[Page 5]

20. On 15 April 2020, the Committee considered the Parties' respective views on the Draft Order and decided on the hearing schedule.

21. On 16 April 2020, De Jesús submitted a Proposal for the Disqualification of the entire ad hoc Committee. The Proceeding was suspended until the proposal was decided on 23 July 2020. The Parties' submissions and the arbitrators' explanations are summarized in the Chairman of the Administrative Council's Decision, whereby the Proposal was declined, and the proceedings resumed on the same day.

22. On 5 August 2020, the Committee invited the Parties to consider the dates of 7, 8, 11, 16, 23, and 24 September for a reconvened hearing. The Parties subsequently provided their availability for the hearing on Stay of Enforcement of the Award.

23. On 10 August 2020, the Secretary of the Committee circulated the Committee's Annotated Draft Procedural Order No. 1 and requested the Parties indicate by 14 August 2020, whether they wish to add or change anything to it.

24. On 14 August 2020, the Parties submitted their respective responses to the Committee's directions of 10 August 2020.

25. On 28 August 2020, the Committee issued Procedural Order No. 1 (“PO1") recording the agreements of the Parties on procedural matters and the Committee's decisions on disputed issues. Procedural Order No. 1 provides, inter alia, that the applicable Arbitration Rules would be those in effect from 10 April 2006, that the procedural languages would be English and Spanish, and that the place of the proceeding would be decided before each session by the Committee after consultation with the Parties. Procedural Order No. 1 also sets out a procedural calendar for the proceeding including the date for the Hearing for the Stay of Enforcement of the Award.

26. On 2 November 2020, the Committee invited the Parties to consider the weeks of 18 and 25 October, 22 November and 6 December 2021, to hold the Hearing on Annulment. The Parties subsequently provided their availability.

[Page 6]

27. On 16 November 2020, the Committee confirmed that the Hearing on Annulment would take place on the week of 25 October 2021.

28. On 26 November 2020, in accordance with the Procedural Calendar set out in PO1, De Jesús and Curtis both submitted their respective Memorial on Annulment. De Jesús’ submission was accompanied by Exhibits A/R-1 to A/R-167 and Legal Authorities A/RLA-1 to A/RLA-76. Curtis' submission was accompanied by Exhibits A/R-1 to A/R-282 and Legal Authorities A/RLA-1 to A/RLA-176.

29. In accordance with the Procedural Calendar set out in PO1, the Conoco Parties filed their Counter-Memorial on Annulment together with Annex A, Exhibits A/C-1 to A/C- 140 and Legal Authorities A/CLA-1 to A/CLA-102 on 24 February 2021.

30. As per the Procedural Calendar set out in PO1, De Jesús and Curtis both submitted their respective Reply on Annulment on 10 May 2021. De Jesús' submission was accompanied by Exhibits A/R-168 to A/R-184 and Legal Authorities A/RLA-77 to A/RLA-94. Curtis' submission was accompanied by Exhibits A/R-283 to A/R-293 and Legal Authorities A/RLA-177 to A/RLA-212.

31. On 23 July 2021, in accordance with the Procedural Calendar set out in PO1, the Conoco Parties filed their Rejoinder on Annulment together with Exhibit A/C-141 and Legal Authorities A/CLA-103 to A/CLA-115.

32. On 3 August 2021, the Secretary of the Committee wrote to the Parties on behalf of the Committee proposing to hold the hearing via Zoom due to the travel restrictions imposed by the COVID pandemic and invited the Parties to confer and agree on a schedule for the hearing.

33. On 11 August 2021, the Conoco Parties and Curtis submitted their proposals on the hearing schedule, and on 12 August 2021, De Jesús submitted its proposal.

34. Given the Parties' differing views on distinct matters, on 17 August 2021, the Committee transmitted its decision on the Parties on the mode of the hearing as well as the time allowance.

[Page 7]

35. On 27 August 2021, the Committee circulated a draft of Procedural Order No. 2 concerning the organization of the Hearing on Annulment.

36. On 13 September 2021, De Jesús filed its proposed revisions and comments to the Committee's draft Procedural Order No. 2; Conoco and Curtis jointly filed their proposed revisions and comments.

37. On 17 September 2021, the Committee informed the Parties that Procedural Order No. 2 would be issued shortly, and a Pre-Hearing Organizational Meeting was not necessary in view of the narrow scope of disagreements.

38. On 29 September 2021, the Committee issued Procedural Order No. 2 (“PO2”) concerning the arrangements for the Hearing on Annulment scheduled for 25-29 October 2021, and incorporating the agreements reached by the parties, as well as decisions made by the Committee in case of disagreements.

39. On 7 October 2021, ICSID wrote to the Parties informing them that the Secretary- General, moved the Committee to stay the proceeding pursuant to ICSID Administrative and Financial Regulation 14(3)(d) and (e).

40. On 14 October 2021, the Committee stayed the proceeding for lack of payment of the required advances, pursuant to ICSID Administrative and Financial Regulations 14(3)(d) and (e).

41. Following the Respondent's payment of the outstanding advance, on 14 March 2022, the suspension of the proceeding was lifted, and the proceeding resumed.

42. On the same date, a disclosure from Mr. Kim was transmitted to the Parties.

43. On 18 March 2022, Mr. Kim notified his co-members and the Secretary-General that he was resigning as a Committee Member. On the same date, the Secretary-General notified the Parties of Committee's vacancy and suspended the proceeding pursuant to ICSID Arbitration Rules 10(2) and 53.

[Page 8]

44. On 20 March 2022, De Jesús requested that the Chairman of the Administrative Council seek a recommendation from the Secretary-General of the Permanent Court of Arbitration to fill the vacancy left by Mr. Kim.

45. On 28 March 2022, the Secretariat acknowledged receipt of the letter and informed the Parties that the Chairman would not seek an external recommendation to fill the vacancy in the ad hoc Committee.

46. On 29 March 2022, De Jesús renewed its request and on 30 March 2022, the Secretariat acknowledged receipt of the request.

47. On 7 April 2022, the Secretariat informed the Parties of the Secretary-General's intention to propose to the Chairman the appointment to the ad hoc Committee of Mr. Lawrence Boo, a national of Singapore.

48. On 29 April 2022, Conoco informed that it had no objections. De Jesús requested that the remaining Committee Members, Judge Hascher and Prof. Fernández Arroyo, resign.

49. On 4 May 2022, Conoco submitted comments to De Jesús's request.

50. On 11 May 2022, the Secretariat transmitted to the Parties Judge Hascher's and Prof. Fernández Arroyo's message that they would continue to serve on the Committee.

51. On 24 May 2022, the Secretariat reiterated the Secretary-General's intention to propose Mr. Boo as per the communication of 7 April 2022.

52. On 26 May 2022, the Secretariat informed the Parties that the Chairman had appointed Mr. Boo and would seek his acceptance.

53. On 1 June 2022, the Committee was reconstituted. The new Committee was composed of Judge Dominique Hascher (French), Professor Diego Fernández Arroyo (Argentine/Spanish) and Professor Lawrence Boo (Singaporean). Following the reconstitution of the Committee, the proceeding resumed pursuant to ICSID Arbitration Rules 12 and 53.

[Page 9]

54. On 12 June 2022, De Jesús submitted a Proposal for the Disqualification of Judge Dominique Hascher and Professor Diego Fernández Arroyo. The Proposal requested that the Secretary-General of ICSID seek a recommendation from a third-party neutral in connection with the Disqualification Proposal.

55. On 17 June 2022, ICSID acknowledged receipt of the Proposal and notified the Parties that in accordance with ICSID Arbitration Rule 9(6), the proceeding was suspended until a decision has been taken on the Disqualification Proposal. ICSID also informed the Parties that Ms. C. E. Salinas Quero, ICSID Legal Counsel, would now serve as Secretary of the Committee and established a procedural calendar for the subsequent filings on the Proposal.

56. On 22 July 2022, ICSID informed the Parties that the Chairman, after due consideration, and in the exercise of his discretion, decided to request a recommendation on the Disqualification Proposal from Mr. Ian Binnie C.C., Q.C., former Justice of the Supreme Court of Canada.

57. On 7 September 2022, following the Parties' comments on ICSID's communication of 22 July 2022, ICSID confirmed Judge Binnie's designation.

58. On 27 September 2022, ICSID transmitted to the Parties the Chairman of the Administrative Council's Decision, including a copy of Judge Binnie's recommendation to the Chair in respect of the Disqualification Proposal, dated 16 September 2022. The Proposal was declined, and the proceedings resumed on the same day.

59. On 5 October 2022, the Parties were invited to confer and propose dates to reschedule the Hearing on Annulment and their views on a paper hearing.

60. Following receipt of the Parties' views on the Committee's message of 5 October 2022, the Committee decided to hold an oral, in-person hearing considering the fact that the sanitary restrictions which prompted videoconferencing in 2021 were lifted.

[Page 10]

61. On 6 December 2022, the Parties were informed that a 3-day hearing would be held on the dates proposed, subject to the Parties' availability. The Committee also set out the Hearing sequence and time allocation for the Hearing.

62. On 21 December 2022, the Committee confirmed that the dates reserved for the 3-day Hearing were 18, 19, 20 and (21 in reserve) October 2023.

63. On 27 January 2023, ICSID informed the Parties of the 3 available venues to hold the 3-day Hearing in October 2023. On 14 February 2023, following the Parties' views on the venues, the Committee deemed Paris as an appropriate venue for the Hearing on Annulment.

64. On 24 August 2023, a draft Procedural Order No. 3 was circulated to the Parties requesting their joint comments or their respective positions in case of disagreement. The Parties were also requested to provide their availability to hold a Pre-Hearing Organizational Meeting.

65. On 18 September 2023, De Jesús filed a request for the ad hoc Committee to decide on the admissibility of new evidence.

66. On 22 September 2023, the Committee issued Procedural Order No. 3 (“PO3”) concerning the arrangements for the Hearing on Annulment.

67. On 29 September 2023, the Claimants filed a request for the ad hoc Committee to decide on the admissibility of new evidence and observations on De Jesús' request of 18 September 2023.

68. On 10 October 2023, the Committee admitted the Parties' document requests of 18 and 29 September 2023.

69. A Hearing on Annulment was held in Paris from 18 October to 20 October 2023 (the “Hearing”). The following persons were present at the Hearing:

Committee:
Judge Dominique Hascher
Prof. Diego Fernández Arroyo

President
Member of the Committee

[Page 11]

[Page 12]

*Denotes remote participant

70. The Parties sent their agreed transcript corrections on 17 November 2023, and the final transcript corrections, with the corrections incorporated by the court reporters were circulated on 29 November 2023.

71. The Parties filed their submissions on costs on 15 December 2023.

72. The proceeding was closed on 2 December 2024.

III.STAY OF ENFORCEMENT

73. The Parties' submissions on the Stay of Enforcement are summarized in the Committee's Decision of 2 November 2020.

74. In its Decision, the Committee decided:

67. [...] to discontinue the stay once it has been satisfied that all assurances have been given by the Conoco Parties that, should enforcement of the Award be possible under the OFAC sanctions regime, it can return any

[Page 13]

money collected under the Award to Venezuela in case of annulment. In fulfilment of this objective, the Committee requests that the Conoco Parties provide:

1. the authorization from OFAC to pay any amounts recovered into a segregated account and to repay any funds paid on the Award if annulled, and
2. the conditions for opening one or more segregated accounts for the funds collected outside of the US, and
3. a guarantee from ConocoPhillips that it will return to Venezuela any funds paid under the Award.

68. The Committee accepts that the authorizations from OFAC be submitted in redacted form.

69. All questions concerning the costs and expenses of the Committee and of the Parties in connection with this application are reserved for subsequent determination, together with the Application for Annulment.

75. By letter dated 22 January 2021, the Claimants informed the Committee that the three conditions set forth in the Committee's Stay Decision, had been satisfied, and therefore the stay should be lifted. The letter was accompanied by Annex 1, a copy of the OFAC Authorization and Annex 2, a guarantee from ConocoPhillips.

76. On 5 February 2021, De Jesús submitted its observations and requested the Committee allow it to verify the evidence produced by the Claimants. The letter was accompanied by Annex 1, OFAC License No. VENEZUELA-EO13884-2020-370509-1 dated 15 January 2021, and Annex 2, ConocoPhillips Company's Letter, Guarantee of Repayment in Satisfaction of the Committee's Conditions on Lifting the Stay of Enforcement dated 21 January 2021.

77. On 8 February 2021, the Committee acknowledged receipt of the submissions and confirmed that it did not receive anything from Venezuela, as represented by Curtis.

78. On 10 February 2021, the Committee wrote to the Parties informing them, among other things, that it “expect[ed] an OFAC authorization delivered to the Conoco Parties, identified in paragraph 3 of the Decision as ConocoPhillips Petrozuata B.V., ConocoPhillips Hamaca B.V. and ConocoPhillips Gulf of Paria B.V., the Respondents

[Page 14]

on Annulment that had opposed on 4 February 2020 Venezuela's request to continue the stay of enforcement.”

79. On 12 February 2021, Conoco submitted a response to the Committee's communication of 10 February 2021, together with Annexes 1-5.

80. The Committee invited Venezuela to file any comments by 26 February 2021.

81. On 26 February 2021, De Jesús filed its comments asking the Committee to dismiss Conoco's request to lift the stay as in their view, they failed to comply with the three conditions set forth in the Committee's Stay Decision.

82. On 3 March 2021, the Committee wrote to the Parties in response to the recent correspondence. The Committee requested among other things, “an official statement from OFAC that the Conoco Parties do not need the authorization requested under n° 67, 1) of the Stay Order”; and for the Conoco Parties to “produce a certificate referring to the commitments signed by Ms Schwarz on 21 January and 12 February 2021 (Annexes 2 and 4) and affirming her power and authority to act on behalf of the ConocoPhillips Company for the matter".

83. On 11 May 2021, Conoco sent a letter to the Committee along with Annexes 1, 6, 7 and 8.

84. On 13 May 2021, the Committee invited Venezuela to comment by 21 May 2021.

85. As instructed by the Committee, De Jesús submitted its comments to the Claimants' letter and Annexes on 21 May 2021.

86. Following receipt of Conoco's and De Jesús' correspondence, the Committee wrote to the Parties on 26 May 2021, and invited Conoco to provide concrete details of the segregated account(s).

87. On 17 June 2021, Conoco submitted an update together with Annexes 1, 3, and 9-11. The following day, the Committee invited Venezuela to comment by 23 June 2021. On 21 June 2021, De Jesús requested an extension, which the Committee granted.

[Page 15]

88. On 30 June 2021, De Jesús filed its comments to Conoco's letter of 17 June 2021.

89. On 9 July 2021, the Committee wrote to the Parties whereby it asked Conoco to respond by 16 July 2021, to three questions posed by the Committee.

90. In accordance with the Committee's instructions, Conoco submitted its response on 16 July 2021, together with Annexes 9, 12 and 13.

91. On 20 July 2021, the Committee invited Venezuela to submit comments by 23 July 2021, which it did.

92. On 26 July 2021, the Committee wrote to the Parties, confirming that the first and third conditions set forth in their Stay Decision had been satisfied and asked Conoco to provide concrete details as to the second condition.

93. On 30 July 2021, Conoco provided an update as requested by the Committee. On 3 August 2021, De Jesús responded by stating that Conoco still had not satisfied the second condition.

94. On 5 August 2021, the Committee wrote to the Parties taking note of the recent correspondence and reserving its position until Conoco provided the final account information as stated in their letter.

95. On 8 September 2021, Conoco provided the final account information of the segregated accounts. On 9 September 2021, the Committee invited Venezuela to comment by 15 September 2021.

96. On 13 September 2011, De Jesús requested an extension until 17 September 2021, to file its comments and the Committee agreed. On 17 September 2021, De Jesús filed its response to Conoco's letter of 8 September 2021.

97. On 29 September 2021, the Committee wrote to the Parties informing them that the second condition of the Decision on Stay had been satisfied and, therefore, the stay of enforcement of the Award rendered on 8 March 2019, was discontinued.

[Page 16]

IV.ORDERS ON REPRESENTATION

A. PROCEDURAL BACKGROUND

98. On 15 March 2020, De Jesús sent a letter asking the Committee to “exclude the participation" of Curtis from this proceeding on the basis that it is acting on a power of attorney issued by “a person who does not exercise any authority or power within the Venezuelan legal system."

99. On 19 March 2020, the Committee invited Curtis and the Claimants to comment on De Jesús' 15 March letter regarding Venezuela's representation in this proceeding.

100. On 30 March 2020, Curtis filed their observations and requested the Committee to reject the application to change the status quo of Venezuela's representation. On the same date, Claimants submitted their respective comments stating that the status quo should be maintained with the participation of both the Special Attorney General and the Acting Attorney General and their respective representatives, Curtis and De Jesús.

101. De Jesús submitted further observations on 31 March 2020.

102. On 3 April 2020, the Committee concluded “that maintaining Curtis and De Jesus as counsel of record accords, at this stage of the proceedings, [complies] with procedural fairness" (¶ 37)¹ and issued an Order rejecting De Jesús' application and decided “not to exclude Curtis, instructed by the Special Attorney General, from these proceedings.”

103. On 9 April 2020, De Jesús submitted a Reconsideration Request asking that the Committee revisit its 3 April Order, arguing that “it lacks a legal basis as it disregards Venezuelan law, the only applicable law to resolve the issue of representation of the Republic” and “ignores the relevant facts in its assessment for the resolution of the issue of representation of the Republic."

¹ Order on the Applicant's Representation, 3 April 2020, ¶ 37.

[Page 17]

104. On 13 April 2020, the Claimants and Curtis submitted their respective comments on the Reconsideration request, and on 14 April 2020, De Jesús submitted their reply.

105. By communication of 15 April 2020, the Committee rejected De Jesús’ 9 April Request observing that the application was based on arguments which were already made by De Jesús in its previous letters and had been considered by the Committee when it decided to reject De Jesús's first application.

106. On April 16, 2020, De Jesús proposed to disqualify the entire ad hoc Committee. The proceeding remained suspended until July 23, 2020, when the Chairman of the Administrative Council issued a decision declining the disqualification proposal.

107. On 3 August 2020, De Jesús filed another request for the Committee to reconsider its Order on Representation of 3 April 2020.

108. Following invitation from the Committee, on 12 August 2020, Curtis and the Claimants filed their observations on De Jesús' request of 3 August 2020.

109. During the Stay of Enforcement Hearing held on 30 September 2020, the Parties were given the opportunity to address De Jesús' 3 August 2020, request. De Jesús presented oral observations during the hearing.

110. By Order dated 2 November 2020, “[f]ailing any demonstration that Venezuela's representation should be in the hands of De Jesús, to the exclusion of Curtis, for the preservation of Venezuela's rights to accede to justice" (¶ 39),² the Committee decided to reject De Jesús' request of 2 August 2020, for reconsideration of the Order on Representation of 3 April 2020.

111. On 21 September 2021, De Jesús filed a Request asking the Committee to reconsider its Order of 2 November 2020.

² Order on the Applicant's Request for Reconsideration, 2 November 2020, ¶ 39.

[Page 18]

112. Upon an invitation from the Committee, on 23 September 2021, Curtis submitted their comments on De Jesús' Request of 21 September 2021, and the Claimants submitted their comments on 27 September 2021.

113. The proceeding was suspended from 14 October 2021 to 14 March 2022, due to lack of payment and again from 18 March to 1 June 2022, following the resignation of Mr. Kim. It was suspended again from 12 June to September 27, 2022, following the proposal to disqualify Committee Members Judge Hascher and Professor Fernández Arroyo.

114. On 6 December 2022, the Committee invited the Parties to update their respective submissions on the issue of the representation. On 15 December 2022, Curtis replied on behalf of Venezuela that “we see no changes in the situation and have no further comment[.]"

115. On 16 December 2022, the Claimants replied that they “have no further observations, as there has been no relevant change of circumstances. If the relevant circumstances do change, however, the Claimants will respond to any renewed application made;” and on 21 December 2022, De Jesús replied that “the Republic fully reiterates the content of its previous submissions [...] and confirms it has no further comment. The Republic's communication is made without prejudice to its objection on the continued participation of Curtis in these proceedings [...]”.

116. By Order dated 15 February 2023, the Committee decided the following:

30. [...] we conclude that the 21 September 2021 Request to reconsider the Reconsideration Order on Representation of 2 November 2020 has not demonstrated that the preservation of Venezuela's effective exercise of the right to present its case has been prejudiced by Curtis' involvement (see Order of 2 November 2020, para. 39).

31. We, therefore, maintain today our Decision of 3 April 2020.

32. All questions concerning the costs and expenses of the Committee and of the Parties in connection with this application are reserved for subsequent determination, together with the Application for Annulment.

[Page 19]

117. On 12 September 2023, De Jesús submitted a letter dated 11 September 2023, from the Attorney General of the Republic of Venezuela requesting that the Committee reconsider its decision issued by way of Order dated 15 February 2023, on the issue of representation by Curtis. De Jesús submitted that in the current political and geopolitical context there is no doubt that the only Government of Venezuela is led by President Maduro and that the Attorney General is Mr Pedroza.³

118. Upon invitation from the Committee, Curtis and the Claimants each filed their observations on De Jesús' request of 12 September 2023.

119. On 8 October 2023, De Jesús submitted a letter dated 7 October 2023, from the Attorney General of the Republic of Venezuela containing further observations on the issue of the representation by Curtis.

120. Upon invitation from the Committee, on 11 October 2023, Curtis submitted a letter from Gustavo Marcano of the Consejo de Administración y Protección de Activos de la República Bolivariana de Venezuela and the Claimants filed their observations on the letter of the Attorney General dated 7 October 2023.

121. On the same date, the Committee acknowledged receipt of the Parties' correspondence and informed them the Request for Reconsideration would be considered and answered with the Request for Annulment of the Award as filed by Curtis on 27 November 2019, and De Jesús as filed on 5 December 2019, the hearing for which was from 18 to 20 October 2023.

B. THE COMMITTEE'S ANALYSIS AND DECISION ON THE ISSUE OF VENEZUELA'S REPRESENTATION

122. The Committee takes note that the Venezuelan political situation has evolved and is thankful to De Jesús for the information in furtherance of the Committee's communication of 16 April 2020. However, as this proceeding is concerned, the situation has not changed in the essence. The Republic, as represented by Curtis, replied

³ Letters of 11 September and 7 October 2023 of Attorney General Muñoz Pedroza.

[Page 20]

that there was no basis to change the Committee's decision. Its Reply stated that “pursuant to the Law Reforming the Statute Governing the Transition to Democracy to Restore the Validity of the Constitution of the Bolivarian Republic of Venezuela, the Council for the Administration and Protection of Assets is the entity appointed by the legitimate representatives of the National Assembly of Venezuela to protect the assets of [the Republic] and to exercise the judicial representation of [the Republic] abroad.”⁴ De Jesús retorted that such a Council does not exist and that the communication addressed to the Committee by its coordinator simulates an official Act of the Republic, even using its official coat of arms.⁵ It would, therefore, be difficult for the Committee to follow De Jesús' position that the situation of rivalry that existed until the time the Committee was deciding the representation issue has now ceased to exist. The Committee has no mandate to determine the political question of which De Jesús or Curtis is the legitimate representative of Venezuela.

123. The Committee turns to De Jesús' observations that failure to exclude Curtis would place the Republic “in a grave situation since it would leave it at the mercy of a group of persons who, without having any authority granted by the Republic, with no regulation on the powers allegedly granted to it and with no limit to said powers, can only act –we assume– in their own interest.”⁶ The Committee is mindful of its role to ensure procedural fairness, as it mentioned in the Order of 3 April 2020.⁷ However, it is difficult to proceed along the route indicated by De Jesús and exclude Curtis's right to be heard, given De Jesús's lack of substantiation regarding the integrity of its own right of defence.

124. The Committee notes that the Republic, through both representations, has sought the annulment of the Award. The arguments made by De Jesús or Curtis are similar and at times even identical. As anticipated by the Committee in its Order of 3 April 2020, even in the case of divergencies between De Jesús and Curtis, the Committee has heard

⁴ Letters of 5 and 11 October 2023 of the Consejo de Administración y Protección de Activos de la República Bolivariana de Venezuela.
⁵ Letter of 7 October 2023 of Attorney General Muñoz Pedroza.
⁶ Letter of 11 September 2023 of Attorney General Muñoz Pedroza, p. 4.
⁷ Order on the Applicant's Representation, 3 April 2020, ¶ 37.

[Page 21]

their respective arguments. In short, Venezuela has had an opportunity, through both representations, to present extensively on its application for annulment; De Jesús and Curtis have made their own submissions and appeared separately at the Hearing on Annulment. As for Conoco, it agreed to bear the heavier burden of responding to the arguments made by Venezuela through the representations of De Jesús and Curtis.

125. The Committee consequently denies reconsidering its previous decisions and, thereby, maintains De Jesús and Curtis as counsel of record and will answer separately in this Decision the submissions made by De Jesús and Curtis as envisaged in the Order of 3 April 2020.⁸

***

⁸ Order on the Applicant's Representation, 3 April 2020, ¶ 36.

[Page 22]

V. SUMMARY OF THE GROUNDS FOR ANNULMENT

126. Venezuela, as represented by De Jesús and Curtis, requests that the ad hoc Committee annul the Award based on the improper constitution of the Tribunal (Article 52(1)(a)); serious departure from a fundamental rule of procedure (Article 52(1)(d)); manifest excess of powers (Article 52(1)(b)); and failure to state reasons (Article 52(1)(e)).

127. Venezuela invokes several annulment grounds in relation to its annulment request, which include: the composition of the Tribunal (A); the Tribunal's exercise of jurisdiction (B); the Tribunal's findings in relation to Article 6 of the Treaty (C); the Tribunal's application of the compensation mechanism (D); the Tribunal's treatment of certain quantum inputs and the valuation date for compensation (E); and the Award on Costs (F).

128. Section VI, Part 1 and Part 2, respectively, contain a summary of the Parties' positions and the Committee's analysis of the annulment standards. Section VII summarizes the Parties' arguments and contains the Committee's analysis on the grounds invoked.

129. The summaries of the Parties' positions present the arguments separately advanced by Curtis and by the De Jesús representations, on one side, and by the Conoco Parties on the other side. In making its findings, the Committee has carefully considered the Parties' positions. References in this Decision to parts of the Parties' written and oral pleadings are not intended to be exhaustive. This summary is meant to give a general overview of this dispute. It does not claim to include all facts, laws, and arguments referenced by the Parties. These will be discussed, as far as considered relevant, in the context of the Committee's analysis of the disputed issues.

130. In its analysis, the Committee deals in separate sections with the arguments respectively advanced by Curtis and De Jesús, following the order in which their Applications for Annulment were filed,⁹ with each section referring to arguments and responses advanced by the Conoco Parties, to avoid repetition.

⁹ See Procedural History, ¶ 6 above.

[Page 23]

VI. THE STANDARDS FOR ANNULMENT

PART 1: THE PARTIES' POSITIONS ON THE STANDARDS UNDER CONVENTION ARTICLE 52

A. THE STANDARD FOR ANNULMENT UNDER ART. 52(1)(A): IMPROPER CONSTITUTION OF THE TRIBUNAL

(a) Venezuela's Position

131. Venezuela (De Jesús and Curtis) argues that the Committee's review under Article 52(1)(a) requires assessing the entirety of the relevant facts pertaining to the constitution of the Tribunal, including compliance with Convention Article 14(1)'s requirement that arbitrators “may be relied upon to exercise independent judgment.”¹⁰ The standard of Article 14(1) includes the concepts of impartiality and independence.¹¹ An arbitrator's failure to possess the qualities of Article 14(1) warrants annulling an award on grounds of improper constitution under Article 52(1)(a).¹²

132. To support its position, Venezuela refers to the ad hoc committee in Eiser v. Spain, which annulled the award in that case on grounds of improper constitution, considering that “the Tribunal must have not only been correctly formed, initially, but must have also continued to remain so for the duration of its existence.”¹³Venezuela also relies on the annulment decisions issued in EDF v. Argentina (“the fact that an arbitrator does not meet the standard required under Article 14(1)...is also a ground on which an award

¹⁰ Memorial (De Jesús), ¶ 17; Reply (De Jesús), ¶ 25; Memorial (Curtis), ¶ 89.
¹¹ Memorial (De Jesús), ¶ 18; Memorial (Curtis), ¶ 89.
¹² Memorial (De Jesús), ¶ 21; Memorial (Curtis), ¶¶ 89, 90.
¹³ Memorial (De Jesús), ¶¶ 15, 21; Reply (De Jesús), ¶ 27; Memorial (Curtis), ¶ 91. A/RLA-41 [De Jesús], Eiser Infrastructure Limited and Energía Solar Luxembourg S.à r.l. v. Kingdom of Spain, ICSID Case No. ARB/13/36 (Annulment Proceeding), Decision on the Kingdom of Spain's Application for Annulment, 11 June 2020, (“Eiser Annulment Decision"), ¶ 158.

[Page 24]

might be annulled under Article 51(1)(a))"¹⁴ and in Suez v. Argentina (“lack of the qualities in Article 14(1) may serve as ground for annulment under Article 52(1)(a)").¹⁵

133. Venezuela (Curtis) submits that the Committee must review the relevant facts and circumstances pertaining to the constitution of the Tribunal and giving rise to Venezuela's failed disqualification proposals, to assess if the arbitrators complied throughout the arbitration with the requirements of independence and impartiality.¹⁶ Venezuela argues that the importance of analyzing an arbitrator's conduct in light of "cumulative circumstances" rather than each circumstance in isolation is well recognized and refers, among others, to Suez v. Argentina, Tidewater v. Venezuela, and writings by authors.¹⁷

134. Venezuela (Curtis) also argues that the ad hoc Committee is not bound by the outcome of Venezuela's failed disqualification proposals during the arbitration.¹⁸ Further, the standards to disqualify arbitrators are directly applicable to determine if a tribunal was improperly constituted under Art. 52(1)(a).¹⁹

135. In its Reply, Venezuela (Curtis) argues that Conoco set a high bar for annulment under Article 52(1)(a). The decisions on challenges are entitled to a certain deference but the deference is not absolute. If a decision to deny disqualification is “plainly unreasonable," then annulment is appropriate.²⁰ In the underlying arbitration, the decision not to disqualify the challenged arbitrator was made by applying a wrong standard individually assessing each challenge in isolation from the prior facts.²¹

¹⁴ A/RLA-5 [Curtis] / A/RLA-29 [De Jesús], EDF International S.A., Saur International S.A. and Leon Participaciones Argentinas S.A. v. Argentine Republic, ICSID Case No. ARB/03/23, Decision on Annulment, 5 February 2016, (“EDF Annulment Decision"), ¶ 127.
¹⁵ A/RLA-43 [Curtis] / A/RLA-77 [De Jesús], Suez, Sociedad General de Aguas de Barcelona S.A. and Vivendi Universal S.A v. Argentine Republic, ICSID Case No. ARB/03/19, Decision on Argentina's Application for Annulment, 5 May 2017, (“Suez Annulment Decision”), ¶ 77; Reply (De Jesús), ¶ 25.
¹⁶ Memorial (De Jesús), ¶¶ 16, 22, 28.
¹⁷ Memorial (Curtis), ¶ 104.
¹⁸ Memorial (De Jesús), ¶¶ 25-27.
¹⁹ Memorial (Curtis), ¶ 92.
²⁰ Reply (Curtis), ¶ 50.
²¹ Reply (Curtis), ¶ 51.

[Page 25]

136. In its Reply, Venezuela (De Jesús),reiterates its position that the Committee is not bound by prior decisions on disqualification but is empowered to assess the relevant facts and circumstances to verify whether the tribunal was properly constituted. The assessment of independence and impartiality under Convention Articles 14 and 57 requires an objective test that does not require proof of actual dependence or bias.²²

137. In addition, the power to assess independence and impartiality is not, despite Conoco's assertion to the contrary, limited to a mere formal validation of disqualification decisions (Azurix). Such limitation would be contrary to the Committee's inherent mission to safeguard the integrity of the proceedings, which has been highlighted in Eiser.²³ Also, the Conoco Parties rely, in the alternative, on the “deferential approach” (EDF),but confuse it with a submissive approach where committees are bound by the prior decisions on disqualification made in the arbitration. The present Committee is free to assess and it is not bound by prior disqualification decisions, as reaffirmed by the Mobil decision.²⁴ In any event, even to apply the "plainly unreasonable" standard of the EDF decision, the Committee would have to consider factual elements to determine if a tribunal lacked independence and impartiality, including the factual and legal findings of the disqualification decisions made by the unchallenged arbitrators and the Chair.²⁵

(b) The Conoco Parties' Position

138. Annulment on this ground cannot succeed unless there was a failure to comply with the provisions of the ICSID Convention and the ICSID Arbitration Rules relating to the constitution of the Tribunal.²⁶ In no event is Venezuela entitled to reargue its failed disqualification proposals.²⁷

²² Reply (De Jesús), ¶¶ 22-29, 33.
²³ Reply (De Jesús), ¶¶ 31, 32.
²⁴ Reply (De Jesús), ¶¶ 35-40.
²⁵ Reply (De Jesús), ¶¶ 41-44.
²⁶ Convention Articles 37 through 40 ("Constitution of the Tribunal"), Articles 56 through 58 ("Replacement and Disqualification of Conciliators and Arbitrators"), and Arbitration Rules 1 through 12 (“Establishment of the Tribunal").
²⁷ Counter-Memorial (Conoco), ¶ 84.

[Page 26]

139. Conoco submits that two approaches have emerged in analysing an alleged improper constitution under Art. 52(1)(a). Both approaches preclude a de novo review of allegations underlying the proposals for disqualification, requiring committees to approach the issue of an arbitrator's independence and impartiality with deference to the tribunal's factual and legal findings.²⁸

140. According to the first approach, the inquiry of improper constitution is purely procedural. If the procedures for the tribunal constitution were followed, that is the end of the matter. The ad hoc committees in Azurix v. Argentina and OI European v. Venezuela adopted this approach.²⁹According to the second approach, an annulment under Art. 52(1)(a) fails “unless the decision not to disqualify the arbitrator in question is so plainly unreasonable that no reasonable decision-maker could have come to such a decision."³⁰ The ad hoc committees EDF v. Argentina, Suez II, and Mobil v. Argentina adopted this approach.³¹ The scope of the Committee's review is limited to the question of whether the rejection of the challenge is so facially unreasonable that no rational decision-maker could have reached the same result.³²

141. In its Rejoinder, the Conoco Parties maintain their position that Venezuela is asking the Committee to make an impermissible de novo review of the allegations underlying the challenges, in circumstances that the challenges were raised and resolved in the arbitration. The two lines of authorities discussed supra (Azurix/ OI European and EDF/Suez II/Mobil Exploration) preclude a de novo review.³³ Under the EDF standard,

²⁸ Counter-Memorial (Conoco), ¶¶ 85 and 87.
²⁹ A/CLA-58, Azurix Corp. v. Argentine Republic, ICSID Case No. ARB/01/12, Decision on Annulment on the Application for Annulment of the Argentine Republic, 1 September 2009, (“Azurix Annulment Decision"), ¶¶ 279-80 (noting that the ground concerns whether the "tribunal was 'not properly constituted” under the “procedures established by ... the ICSID Convention"); see also A/CLA-91, OI European Group B.V. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/11/25, Decision on the Application for Annulment of the Bolivarian Republic of Venezuela, 6 December 2018, (“ΟΙ Annulment Decision"), ¶ 108 (adopting the Azurix approach, noting that it "maintains the distinction between the rules and standards concerning tribunal formation, arbitrator challenges and annulment, thus facilitating the operation of the Convention and Rules").
³⁰ EDF Annulment Decision, ¶ 145
³¹ Suez Annulment Decision, ¶¶ 92-94; A/CLA-97 / A/RLA-45 [De Jesús], Mobil Exploration and Development Argentina Inc. Suc. Argentina and Mobil Argentina S.A. v. Argentine Republic, ICSID Case No. ARB/04/16, Decision on the Application for Annulment by the Argentine Republic, 8 May 2019, (“Mobil Annulment Decision"), ¶ 44.
³² Counter-Memorial (Conoco), ¶ 165.
³³ Rejoinder (Conoco), ¶ 25.

[Page 27]

the Committee must proceed with deference, limited to the facts found in the original decisions on disqualification and only review if the decisions were “plainly unreasonable."³⁴

142. Conoco submits, contrary to Venezuela's (Curtis) position, that the adjudicators did not apply the wrong standard. Venezuela advocates for a “cumulative circumstances" rule which does not exist in the ICSID Convention or any annulment decision, and which Venezuela argued many times in the arbitration and lost every time.³⁵ Venezuela (De Jesús) similarly argues that the disqualification proposals were decided under an incorrect standard. Venezuela requests the Committee to assess the facts and circumstances giving rise to the proposals for disqualification. Such a request amounts to an impermissible de novo review and is nowhere to be found in the ICSID Convention or decided cases.³⁶

B. THE STANDARD FOR ANNULMENT UNDER ART. 52(1)(B): MANIFEST EXCESS OF POWERS

(a) Venezuela's Position

143. Venezuela (De Jesús) submits that two conditions must be met for an award to be annulled under Article 52(1)(b): first, the tribunal must have exceeded its powers; second, the excess must be manifest.³⁷This Committee should, like other ad hoc committees have done in the past, adopt a 2-step approach to firstly, determine if the Tribunal exceeded its powers, and secondly, determine if the excess was manifest.³⁸

144. Venezuela submits that a tribunal exceeds its powers when it goes beyond the scope of the parties' consent given by the arbitration agreement or parties' submissions, or when it fails to apply the applicable law.³⁹ Further, Venezuela (Curtis) argues that a manifest

³⁴ Rejoinder (Conoco), ¶ 28.
³⁵ Rejoinder (Conoco), ¶¶ 28(a), 34-38, 61.
³⁶ Rejoinder (Conoco), ¶ 28(b).
³⁷ Memorial (De Jesús), ¶ 136; Reply (De Jesús), ¶ 48.
³⁸ Memorial (De Jesús), ¶ 137; Reply (De Jesús), ¶ 48.
³⁹ Memorial (De Jesús), ¶ 138; Memorial (Curtis), ¶¶ 290, 291.

[Page 28]

excess of powers exists when a tribunal invents a dispute or create its own facts out of the undisputed material facts agreed between the parties.⁴⁰

145. Regarding excess of power as going beyond party agreement, Venezuela relies on the decision of the Helnan ad hoc committee, to argue that, in the case of an investment treaty claim the parties’ agreement is constituted by the BIT, the ICSID Convention and the claims brought against the State.⁴¹ In the present case, the Committee must first frame the scope of the Tribunal’s powers and to that end it “must primarily consider the terms of the ICSID Convention and those of the BIT.”⁴²Venezuela argues this exercise requires the Committee to independently interpret the jurisdictional sources and to carefully analyze the relevant case and doctrine of other tribunals and ad hoc committees.⁴³

146. Regarding excess of power as failure to apply the law, Venezuela argues that the Committee should not limit itself to listing the applicable rules; instead, it should verify that the Tribunal applied the rules under the specific circumstances of this case. Venezuela relies on the decision of the ad hoc committee in Klöckner which annulled the award under its scrutiny. According to the Klöckner committee, a tribunal fails to apply the law if it limits itself “to postulating and not demonstrating the existence of a principle or exploring the rules by which it can only take concrete form.”⁴⁴Venezuela also submits that there is manifest excess of powers in cases of gross or egregious misinterpretation or misapplication of the law, which is tantamount to failing to apply the proper law.⁴⁵

⁴⁰ Memorial (Curtis), ¶¶ 294, 696. ↩

⁴¹ Memorial (De Jesús), ¶ 138 and Memorial (Curtis), ¶ 290, citing A/RLA-98 [Curtis] / A/RLA-59 [De Jesús], Helnan International Hotels A/S v. Arab Republic of Egypt, ICSID Case No. ARB/05/19, Decision of the ad hoc Committee, 14 June 2010, ¶ 40. ↩

⁴² Memorial (De Jesús), ¶ 140; Reply (De Jesús), ¶ 52. ↩

⁴³ Memorial (De Jesús), ¶ 140. ↩

⁴⁴ Memorial (De Jesús), ¶ 141 and Memorial (Curtis), ¶ 292, citing A/RLA-15 [Curtis] / A/RLA-39 [De Jesús], Klöckner Industrie-Anlagen GmbH and others v. United Republic of Cameroon and Société Camérounaise des Engrais S.A., ICSID Case No. ARB/81/2, Decision on the Application for Annulment Submitted by Klöckner Against the Arbitral Award, 3 May 1985, (“Klöckner Annulment Decision”), ¶ 79; Reply (De Jesús), ¶ 59. ↩

⁴⁵ Memorial (De Jesús), ¶ 272; Memorial (Curtis), ¶ 291. ↩

[Page 29]

147. Regarding the second part of the test, Venezuela’s view (De Jesús) argues that the “manifest” requirement may be deemed satisfied each time an excess of powers regarding jurisdiction is committed by an arbitral tribunal because jurisdictional issues are clear-cut issues: either a tribunal has jurisdiction, or it does not. In the latter case, if the tribunal nevertheless assumes jurisdiction, it necessarily exceeds its powers.⁴⁶

148. In its Reply, Venezuela (Curtis), suggests that the annulment decisions in Occidental v. Ecuador and in Mobil v. Venezuela are instructive on the issue of manifest excess of power and they put to rest Conoco’s premise that manifest excess cannot coexist with extensive argumentation and analysis.⁴⁷

149. Venezuela also replies that the Conoco Parties fail to deal with the cases demonstrating that failure to apply the applicable law constitute a ground for annulment. They ignored the Mobil decision and failed to deal with Soufraki, according to which egregious misinterpretation or misapplication of the proper law may amount to failure to apply the proper law. Venezuela also refers to several authors and submits that a tribunal manifestly exceeds its authority if it disregards the agreement of the parties or goes beyond their submissions.⁴⁸

150. Finally, Venezuela rebuts that the Tribunal disregarded the Parties’ agreements and awarded compensation where it was not requested. Such excursions constitute an excess of authority, beyond any discretion they may be afforded to deal with quantum matters.⁴⁹

151. In its Reply, Venezuela (De Jesús), reiterates that the Committee shall perform a two-step analysis, which requires starting by framing the limits of the Tribunal’s powers under the BIT and the ICSID Convention. Venezuela submits that the Conoco Parties

⁴⁶ Memorial (De Jesús), ¶ 142. ↩

⁴⁷ Reply (Curtis), ¶¶ 60-62. ↩

⁴⁸ Reply (Curtis), ¶¶67-71. ↩

⁴⁹ Reply (Curtis), ¶¶ 72-76. ↩

[Page 30]

have not presented other appropriate methodology, other than objecting to the Committee reviewing the sources of the Tribunal’s jurisdiction and applicable law.⁵⁰

152. Venezuela also replies that Conoco Parties’ defense created confusion between the first and second steps of the analysis. Venezuela submits that a tribunal exceeds its powers if it makes a decision non-compliant with the scope of its jurisdiction or if it fails to apply the applicable law. Venezuela relies on Soufraki to argue that egregious misapplication of the proper law or partial application of the law constitute excess of power.⁵¹

153. Relying on Caratube, Venezuela argues that the assessment of whether the excess was “manifest” does not limit the Committee’s analysis to a prima facie review and.⁵² Venezuela submits that Conoco Parties impliedly acknowledge that the Committee is empowered to analyze the Award, when they posit that the relevant factor is whether the question resolved by the tribunal was “open to debate.” However, Venezuela argues that jurisdictional issues are clear-cut and not open to debate.⁵³¶¶

154. Despite to Conoco’s contention to the contrary, Venezuela argues that a “manifest” excess does not require there to be substantive adverse consequences to the party seeking an annulment. Several authorities acknowledge that “manifest” does not relate to the seriousness of the excess. Furthermore, Venezuela argues under Article 52(1)(b), excesses such as failure to apply the applicable law are naturally adverse to the party seeking an annulment.⁵⁴

⁵⁰ Reply (De Jesús), ¶. ↩

⁵¹ Reply (De Jesús), ¶¶ 56-61, citing at para. 61, A/RLA-8 [Curtis] / A/RLA-32 [De Jesús], Hussein Nuaman Soufraki v. The United Arab Emirates, ICSID Case No. ARB/02/7, Decision of the Ad Hoc Committee on the Application for Annulment of Mr. Soufraki, 5 June 2007, (“Soufraki Annulment Decision”), ¶ 86. ↩

⁵² Reply (De Jesús), ¶ 65, citing A/RLA-60 [De Jesús] / A/RLA-60 [Curtis], Caratube International Oil Company LLP v. Republic of Kazakhstan, ICSID Case No. ARB/08/12, Decision on the Annulment Application of Caratube International Oil Company LLP, 21 February 2014, (“Caratube Annulment Decision”), ¶ 84. ↩

⁵³ Reply (De Jesús), ¶¶ 70-72. ↩

⁵⁴ Reply (De Jesús), ¶ 74. ↩

[Page 31]

(b) The Conoco Parties’ Position

155. Conoco’s position is that the ground of Article 52(1)(b) does not empower ad hoc committees to supplant a tribunal’s findings of fact or law. The ground of “manifest excess of powers” prevents the tribunal from “stepp[ing] entirely outside the scope of its authority’ as vested in it by the consent of the parties.”⁵⁵

156. Conoco agrees that under Article 52(1)(b), the Committee should make a two-step inquiry: first determine if the Tribunal exceeded its power; and second, if so, determine if the excess was “manifest.”⁵⁶ This inquiry does not encompass an assessment of the evidence adduced before the tribunal and its probative value. Conoco argues that a tribunal’s factual findings “are essentially unassailable on annulment.”⁵⁷

157. Conoco refers to the ad hoc committee in Impregilo to support its position that “manifest” means that the excess of power must be “obvious, self-evident, clear, flagrant and substantially serious.” This is a high threshold which is reached if the excess of powers is discernible or obvious from a simple reading of the award, without requiring an elaborate analysis of the award.⁵⁸ In this regard, Conoco refers, among others, to the decisions of the ad hoc committees in Standard Chartered Bank v. Tanzania⁵⁹ and in Repsol YPF v. Ecuador.⁶⁰

158. Also, the alleged excess of powers is not “manifest” unless a tribunal’s opinion is so untenable that it cannot be supported by reasonable arguments. For Conoco, “[...] an

⁵⁵ Counter-Memorial (Conoco), ¶ 92, citing Soufraki Annulment Decision, ¶ 37. ↩

⁵⁶ Counter-Memorial (Conoco), ¶ 94; Rejoinder (Conoco), ¶ 14. ↩

⁵⁷ Counter-Memorial (Conoco), ¶ 99. ↩

⁵⁸ Counter-Memorial (Conoco), ¶¶ 95, 96; Rejoinder (Conoco), ¶ 15. ↩

⁵⁹ Counter-Memorial (Conoco), ¶ 96, citing A/CLA-89 / A/RLA-187 [Curtis], Standard Chartered Bank (Hong Kong) Limited v. Tanzania Electric Supply Company Limited, ICSID Case No. ARB/10/20, Decision on Annulment, 22 August 2018, ¶ 181 (“The excess is ‘manifest’ in nature if it is obvious, clear, self-evident, and discernible without the need for an elaborate analysis of the award.”). ↩

⁶⁰ Counter-Memorial (Conoco), ¶ 96, referring to A/CLA-53, Repsol YPF Ecuador, S.A. v. Empresa Estatal Petróleos del Ecuador (Petroecuador), ICSID Case No. ARB/01/10, Decision on Annulment, 8 January 2007, ¶ 36 (“It is generally understood that exceeding one’s powers is ‘manifest’ when it is ‘obvious by itself’ simply by reading the Award, that is, even prior to a detailed examination of its contents [...].”). ↩

[Page 32]

alleged error cannot constitute a ‘manifest’ excess of power if the underlying issue is subject to more than one reasonable interpretation or is otherwise open to debate.”⁶¹

159. Conoco also identifies an additional cumulative requirement, namely that the excess of powers is “manifest” only if it had substantive consequences adverse to the party seeking an annulment. This requirement, Conoco argues, follows from the exceptional nature of annulment as a post-award remedy.⁶²

160. Conoco’s position is that an erroneous interpretation or application of the law is not a manifest excess of powers. Also, failure to apply the applicable law is not an excess of powers, unless a tribunal fails to apply the “proper law in toto.”⁶³ A tribunal’s decision not to address or apply a particular legal provision that it considers irrelevant does not constitute a failure to apply the applicable law.⁶⁴ Conoco submits that Venezuela insists on alleged errors in the Tribunal’s application of the BIT provisions or customary international law, in an attempt to relitigate issues decided by the Tribunal.⁶⁵

161. Finally, in Conoco’s view, under an analysis under Article 52(1)(b), a tribunal maintains a broad margin of discretion in exercising its power to award and calculate damages. Committees are not permitted to review de novo a tribunal’s damages assessment.⁶⁶

162. In its Rejoinder, Conoco submits that the annulment decisions on which Venezuela relies did not engage a re-examination of the evidence and arguments presented to the

⁶¹ Counter-Memorial (Conoco), ¶ 97, referring to A/RLA-61 [Curtis], Duke Energy International Peru Investments No. 1, Limited v. Republic of Peru, ICSID Case No. ARB/03/28, Decision on Annulment, 1 March 2011, (“Duke Energy Annulment Decision”), ¶ 99 (“A debatable solution is not amenable to annulment, since the excess of powers would not then be ‘manifest.”’). ↩

⁶² Counter-Memorial (Conoco), ¶ 98. ↩

⁶³ Counter-Memorial (Conoco), ¶ 104, referring to A/RLA-64 [De Jesús], AES Summit Generation Limited and AES-Tisza Erömü Kft. v. Hungary, ICSID Case No. ARB/07/22, Decision on Annulment, 29 June 2012, (“AES Annulment Decision”), ¶ 35; ↩

⁶⁴ Counter-Memorial (Conoco), ¶ 105. ↩

⁶⁵ Counter-Memorial (Conoco), ¶ 103. ↩

⁶⁶ Counter-Memorial (Conoco), ¶ 107. ↩

[Page 33]

tribunal. Besides, the term “manifest” demands that the excess be obvious and discernible without the need for elaborate interpretation or analysis.⁶⁷

163. Further, Conoco submits that Venezuela omits a part of the standard adopted in Soufraki, namely that an egregious error of law can amount to a failure to apply the proper law if the error is so gross that no reasonable person could accept it. Venezuela has not met that standard.⁶⁸ Finally, Conoco reiterates that tribunals have significant latitude in resolving legal questions, arriving at compensation amounts and pursuing the line of reasoning they find most convincing, without being limited to the specific arguments presented by the parties.⁶⁹

C. THE STANDARD FOR ANNULMENT UNDER ART. 52(1)(D): SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE

(a) Venezuela’s Position

164. Venezuela (De Jesús and Curtis) submit that for annulment to proceed under Article 52(1)(d), there must be (i) a serious departure, and (ii) it must be of a fundamental rule of procedure.⁷⁰

165. For Venezuela, a fundamental rule of procedure refers to a set of minimal procedural standards to be respected under international law. For example, equal treatment, the right to be heard and the right to an independent and impartial tribunal are fundamental rules of procedure. Venezuela relies on the annulment decisions in Wena, Impregilo, and Orascom.⁷¹

⁶⁷ Rejoinder (Conoco), ¶ 15. ↩

⁶⁸ Rejoinder (Conoco), ¶¶ 16, 17. ↩

⁶⁹ Rejoinder (Conoco), ¶ 18. ↩

⁷⁰ Memorial (Curtis), ¶ 110; Memorial (De Jesús), ¶ 97; Reply (De Jesús), ¶ 78. ↩

⁷¹ Memorial (De Jesús), ¶ 98; Memorial (Curtis), ¶¶ 112, 113; Reply (De Jesús), ¶¶ 80-82, citing A/RLA-36 [De Jesús] / A/RLA-12 [Curtis], Impregilo S.p.A. v. Argentine Republic, ICSID Case No. ARB/07/17, Decision of the Ad Hoc Committee on the Application for Annulment, 24 January 2014, (“Impregilo Annulment Decision”), ¶ 165; A/CLA-102, Orascom TMT Investments S.à r.l. v. People’s Democratic Republic of Algeria, ICSID Case No. ARB/12/35, Decision on Annulment, 17 September 2020, (“Orascom Annulment Decision”), ¶ 139; A/RLA-51 [De Jesús], Wena Hotels Limited v. Arab Republic of Egypt, ICSID Case No. ARB/98/4, Decision, 5 February 2002, (“Wena Annulment Decision”), ¶ 57. ↩

[Page 34]

166. Venezuela’s position is that a departure is serious if it deprives a party of the benefit or protection a rule intends to provide.⁷² Further, referring to the decisions of the ad hoc committees in Pey Casado v. Chile⁷³ and in Caratube v. Kazakhstan,⁷⁴ Venezuela submits that a departure is serious if it had or if it could have had a material impact on the tribunal’s decision.⁷⁵

167. In its Reply (Curtis), clarifies that it invoked this ground for annulment in situations where Venezuela was denied the right to respond or the right to an impartial tribunal or to appoint a replacement arbitrator. Despite Conoco’s position to the contrary, these are rules concerning the integrity and fairness of the arbitration.⁷⁶ Relying on the annulment decision in Eiser v. Spain, Venezuela submits that the denial of its right to appoint a replacement arbitrator or to have an impartial tribunal are “serious” departures, as they could have had a material effect on the arbitrators, their deliberations, and the outcome.⁷⁷

168. In its Reply, Venezuela (De Jesús) asserts that the issue is not the need to satisfy any two-prong test but the scope and content concerning the fundamental rules of procedure.⁷⁸ Venezuela rebuts Conoco’s proposition that Venezuela’s right to appoint an arbitrator or to present its case should be excluded and are not concerned with the integrity and fairness of the procedure.⁷⁹ Venezuela also disputes Conoco’s position that for the departure to be serious it must reach a substantially different result had the rule been observed. Venezuela instead posits, citing the annulment decisions in Caratube, Orascom, and TECO in support, that a departure is serious if compliance

⁷² Memorial (De Jesús), ¶ 99; Memorial (Curtis), ¶ 110; Reply (De Jesús), ¶ 84. ↩

⁷³ A/RLA-14 [Curtis] / A/RLA-38 [De Jesús], Victor Pey Casado and Foundation “President Allende” v. Republic of Chile, ICSID Case No. ARB/98/2, Decision on the Application for Annulment of the Republic of Chile, 18 December 2012, (“Pey Casado Annulment Decision”), ¶ 80. ↩

⁷⁴ Caratube Annulment Decision, ¶ 99 (emphasis added) (quoting Wena Annulment Decision, ¶ 61). ↩

⁷⁵ Memorial (De Jesús), ¶ 100; Memorial (Curtis), ¶ 110; Reply (De Jesús), ¶ 85. ↩

⁷⁶ Reply (Curtis), ¶¶ 78, 79. ↩

⁷⁷ Reply (Curtis), ¶¶ 81, 82. ↩

⁷⁸ Reply (De Jesús), ¶ 79. ↩

⁷⁹ Reply (De Jesús), ¶ 83. ↩

[Page 35]

with the rule could have potentially affected the award, without requiring a showing of a different outcome.⁸⁰

(b) The Conoco’s Parties’ Position

169. According to Conoco, Article 52(1)(d) seeks to ensure that “minimal standards of procedure” are observed in arbitral proceedings,⁸¹ under which the party seeking annulment must prove (i) the existence of a fundamental rule, and that (ii) the Tribunal or the Chairman seriously departed from such rule.⁸²

170. Conoco’s position is that the violated rule must be fundamental in the sense that it relates to a due process element, like equal treatment, the right to be heard, to respond or to an independent and impartial tribunal. Annulment under Article 52(1)(d) excludes ordinary rules not concerned with the integrity or fairness of the arbitration.⁸³ This ground is “restricted to the principles of natural justice, including the principles that both parties must be heard and that there must be adequate opportunity for rebuttal”⁸⁴

171. A serious departure, Conoco submits, is one that causes the tribunal to reach a result substantially different from that which it would have reached had the rule been observed. A serious departure is not one which merely potentially impacts the outcome.⁸⁵

⁸⁰ Reply (De Jesús), ¶¶ 86-89, citing Caratube Annulment Decision, ¶ 43; Orascom Annulment Decision, ¶ 142; A/RLA-65 [De Jesús] / A/RLA-115 [Curtis] TECO Guatemala Holdings LLC v. Republic of Guatemala, ICSID Case No. ARB/10/23, Decision on Annulment, 5 April 2016, (“TECO Annulment Decision”), ¶ 85. ↩

⁸¹ Counter-Memorial (Conoco), ¶¶ 110, 343, referring to A/RLA-99 [Curtis] / A/RLA-76 [De Jesús], Tza Yap Shum v. Republic of Peru, ICSID Case No. ARB/07/6, Decision on Annulment, 12 February 2015, (“Tza Yap Shum Annulment Decision”), ¶ 116 (citing Wena Annulment Decision, ¶ 57). ↩

⁸² Counter-Memorial (Conoco), ¶ 110; Rejoinder (Conoco), ¶ 19. ↩

⁸³ Counter-Memorial (Conoco), ¶ 111. ↩

⁸⁴ Counter-Memorial (Conoco), ¶¶ 111, 343, referring to A/RLA-9 [Curtis] / A/RLA-33 [De Jesús], Fraport AG Frankfurt Airport Services Worldwide v. Republic of the Philippines, ICSID Case No. ARB/03/25, Decision on Annulment, 23 December 2010, ¶ 186 (citing A/CLA-33, History of the ICSID Convention, Volume II, Part 1, Documents 1-43 (1968) (excerpt), pp. 271, 423, 480, 517). ↩

⁸⁵ Counter-Memorial (Conoco), ¶¶ 114, 115. ↩

[Page 36]

D. THE STANDARD FOR ANNULMENT UNDER ART. 52(1)(E): FAILURE TO STATE REASONS

(a) Venezuela’s Position

172. Convention Article 52(1)(e) must be read in conjunction with Convention Article 48(3), which requires that the award “‘deal with every question submitted to the Tribunal and [to] state the reasons’ on which the award is based.”⁸⁶ At a minimum, Articles 48(3) and 52(1)(e) require that the reader can follow how the tribunal proceeded from Point A to Point B – a standard the committee in MINE v. Guinea adopted.⁸⁷ In its Reply, Venezuela (De Jesús) notes that Conoco Parties rely on the test articulated in MINE.⁸⁸ Venezuela (De Jesús) argues that contradictory or frivolous reasons do not meet this minimum standard articulated in MINE.⁸⁹ However, insufficient or inadequate reasons amount to a failure to state reasons,⁹⁰ and as the committee in Soufraki considered, can spur an annulment.⁹¹

173. Further, Articles 48(3) and 52(1)(e) oblige a tribunal to deal with the issues, arguments and evidence presented to it. For example, the committee in MINE annulled the damages section of the award due to the tribunal’s failure to consider the parties’ arguments. Similarly, the committee in Occidental v. Ecuador stressed the importance of addressing every question submitted to the tribunal, and the committee in TECO v. Guatemala, stresses that “a tribunal is duty bound to the parties to at least address those pieces of evidence that the parties deem to be highly relevant to their case and, if it finds them to be of no assistance, to set out the reasons for this conclusion.”⁹²

⁸⁶ Memorial (Curtis), ¶ 296; Memorial (De Jesús), ¶ 292; Reply (De Jesús), ¶ 94. ↩

⁸⁷ Memorial (Curtis), ¶ 297, Memorial (De Jesús), ¶ 196, respectively, citing and referring to A/RLA-10 [Curtis] / A/RLA-34 [De Jesús], Maritime International Nominees Establishment v. Republic of Guinea, ICSID Case No. ARB/84/4, 22 December 1989, (“MINE Annulment Decision”), ¶ 5.09. ↩

⁸⁸ Reply (De Jesús), ¶ 109. ↩

⁸⁹ Memorial (Curtis), ¶ 297, citing MINE Annulment Decision, ¶ 5.08-5.09; Memorial (De Jesús), ¶ 196. ↩

⁹⁰ Memorial (De Jesús), ¶ 357. ↩

⁹¹ Memorial (Curtis), ¶ 297, citing Soufraki Annulment Decision, ¶¶ 122-123. ↩

⁹² Memorial (Curtis), ¶¶ 300, 301, respectively, citing A/RLA-114 [Curtis] / A/RLA-58 [De Jesús], Occidental Petroleum Corporation and Occidental Exploration and Production Company v. The Republic of Ecuador, ICSID Case No. ARB/06/11, Decision on Annulment of the Award, 2 November 2015, (“Occidental Annulment Decision”), ¶ 64; and TECO Annulment Decision, ¶¶ 131, 135-136, 138. ↩

[Page 37]

174. In its Reply, Venezuela (Curtis) again refers to the annulment decision in Mobil, which the Conoco Parties failed to address along with other authorities. The committee in Mobil found that portions of the ICC award dealing with the relevance of the compensation provisions were unsupported by analysis and based on contradictory reasoning, and decided that it constituted a failure to state reasons. Venezuela also acknowledges that not every piece of evidence must make its way into the tribunal’s analysis, but merely reciting documents in the record does not equal to addressing them. Venezuela refers to the annulment decision in TECO to argue that a tribunal cannot ignore key documents and critical arguments advanced by a party.⁹³

175. In its Reply, Venezuela reiterates that the Committee is empowered to review if the Tribunal’s reasons were contradictory, insufficient or inadequate so as to warrant annulment under Convention Article 52(1)(e).⁹⁴ Venezuela argues that the Conoco Parties misrepresent Venezuela’s pleadings, insinuating the Republic is criticizing the quality (correctness) or persuasiveness of the Tribunal’s reasoning, whereas Venezuela’s arguments are grounded on the Award’s inadequate or insufficient and its contradictory reasons.⁹⁵

176. Venezuela submits that the Committee should apply the Klöckner test, which states that two genuinely contradictory reasons cancel each other out. Venezuela rejects Conoco’s proposition to apply a heightened threshold, namely, that reasons must, firstly, be genuinely contradictory, and secondly, the issue relating to those reasons is necessary for the Tribunal’s decision. This heightened threshold, Venezuela argues, is not a settled one.⁹⁶

⁹³ Reply (Curtis), ¶¶ 83-87. ↩

⁹⁴ Reply (De Jesús), ¶¶ 95-99. ↩

⁹⁵ Reply (De Jesús), ¶¶ 101-107. ↩

⁹⁶ Reply (De Jesús), ¶¶ 110, 111. ↩

[Page 38]

(b) The Conoco Parties’ Position

177. Convention Article 48(3) requires the tribunal to provide a reasoned award. In limited circumstances, a violation of the duty to provide reasons leads to annulment under Convention Article 52(1)(e).

178. This annulment ground does not permit committees to review the quality or persuasiveness of the tribunal’s reasoning. Failure to state reasons can arise when there is complete absence of reasons; when the reasoning is contradictory; or where the reasoning lacks coherence so that it cannot be followed from “Point A” to “Point B.”⁹⁷

179. Venezuela attacks the award on alleged failure to provide reasons, or for unintelligible reasons, but in reality, it disagrees with the Tribunal’s reasoning and with the outcome of the Award. Article 52(1)(e) does not permit scrutinising the quality of the reasons or substituting the tribunal’s judgment with the committee’s own judgment.⁹⁸ Ad hoc committees have confirmed that there is no basis for annulment if it is possible to follow a tribunal’s reasoning through to its conclusion- even if the award contains errors of fact or law. Conoco refers to the Vivendi I committee, which considered that the ground of “Article 52(1)(e) concerns a failure to state any reasons with respect to all or part of an award, not the failure to state correct or convincing reasons. [...] [p]rovided that the reasons given by a tribunal can be followed and relate to the issues that were before the tribunal, their correctness is beside the point in terms of Article 52(1)(e).”⁹⁹

180. Further, a tribunal is not required to address each argument raised under every claim, or any argument that is not relevant to its decision. Neither is the tribunal required to expressly address any particular piece of evidence.¹⁰⁰ Failure to state reasons must relate to a point that is essential to the tribunal’s decision. A tribunal’s reasons may be

⁹⁷ Counter-Memorial (Conoco), ¶ 121; Rejoinder (Conoco), ¶ 20. ↩

⁹⁸ Counter-Memorial (Conoco), ¶ 122. ↩

⁹⁹ Counter-Memorial (Conoco), ¶ 122, citing A/CLA-43, Compañía de Aguas del Aconquija S.A. and Vivendi Universal S.A. v. Argentine Republic, ICSID Case No. ARB/97/3, Decision on Annulment, 3 July 2002, (“Vivendi I, Annulment Decision”), ¶ 647. ↩

¹⁰⁰ Counter-Memorial (Conoco), ¶¶ 124, 125. ↩

[Page 39]

implicit, if they are understandable. Neither Article 48(3) nor Article 52(1)(e) specifies the manner in which a tribunal must state its reasons.¹⁰¹

181. Finally, the threshold for finding contradictory reasons amounting to a failure to state reasons is high. Conoco refers to the decision of the Daimler committee, which considered that annulment based on contradictory reasons requires “[f]irst, the reasons must be genuinely contradictory in that they cancel each other out so as to amount to no reasons at all. Second, the point with regard to which these reasons are given is necessary for the tribunal’s decision.”¹⁰² In this regard, there is a difference between genuine contradictions and a tribunal’s weighing of conflicting considerations (Vivendi I).¹⁰³

182. In addition, the Daimler committee noted, “in reviewing the apparent contradictions, the ad hoc committee should, to the extent possible and considering each case, prefer an interpretation which confirms an award’s consistency as opposed to its alleged inner contradictions.”¹⁰⁴ In any event, in this case, there were no contradictions in the Tribunal’s reasoning, so no interpretation is necessary.

183. In its Rejoinder, Conoco reiterates that the threshold for establishing a failure to state reasons is high, and committees are not permitted to review the persuasiveness or correctness of the tribunal’s reasons. Conoco argues that Venezuela cites no authority to undermine this standard.¹⁰⁵

184. Conoco also replies to Venezuela’s contention that a tribunal cannot ignore key documents and critical arguments. Yet what constitutes a “key” document, or a “critical” argument is a determination left to the tribunal, which committees cannot

¹⁰¹ Counter-Memorial (Conoco), ¶¶ 125, 126. ↩

¹⁰² Counter-Memorial (Conoco), ¶ 127, citing A/RLA-58 [Curtis] / A/RLA-80 [De Jesús], Daimler Financial Services A.G. v. Argentine Republic, ICSID Case No. ARB/05/1, Decision on Annulment, 7 January 2015, (“Daimler Annulment Decision”), ¶ 77. ↩

¹⁰³ Counter-Memorial (Conoco), ¶ 128, referring to Vivendi I, Annulment Decision, ¶ 65 (“[T]ribunals must often struggle to balance conflicting considerations, and an ad hoc committee should be careful not to discern contradiction when what is actually expressed in a tribunal’s reasons could more truly be said to be but a reflection of such conflicting considerations.”). ↩

¹⁰⁴ Counter-Memorial (Conoco), ¶ 128, citing Daimler Annulment Decision, ¶ 78. ↩

¹⁰⁵ Rejoinder (Conoco), ¶ 20. ↩

[Page 40]

second guess on annulment. Also, TECO, on which Venezuela relies, is entirely different from this one. The TECO committee concluded that the tribunal had ignored 1,200 pages of evidence submitted by the parties’ experts on an outcome-determinative issue, leaving the committee to guess the tribunal’s reasoning, if any. Such a situation is not comparable to the Tribunal’s approach in this case.¹⁰⁶

PART 2: THE COMMITTEE’S ANALYSIS OF THE APPLICABLE STANDARDS

185. In this section on the standards of annulment, the Committee only wishes to discuss the areas of contention between the Parties and remind all of the generally accepted characteristics of the grounds of challenge raised by Venezuela. In Part 3 of this Decision, the Parties can find the Committee’s analysis of the arguments made by the Parties for each ground of annulment invoked under Convention Article 52.

(a) Article 52(1)(a) – Improper Tribunal Constitution

186. Ad hoc committees are called under Convention Article 52 to safeguard the integrity of the process of dispute settlement. This objective forms the basic goal projected in the ICSID annulment mechanism of Convention Article 52. Independence and impartiality, qualities that every ICSID arbitrator should possess according to Convention Article 14(1) and Arbitration Rule 6, are quintessential to the dispensing of justice, in arbitration, and are regarded as prerequisites for a valid award under Article 52(1)(a).

187. This Committee considers that the test for an Article 52(1)(a) inquiry made based on the alleged lack of independence and impartiality, commences with the question of whether the right to raise the matter was waived because the party seeking annulment failed to raise it sufficiently promptly. Then, if not, whether the party seeking annulment could establish that a third party would find a manifest appearance of lack of independence or impartiality on the part of an arbitrator on a reasonable evaluation of the facts of the case; and then, if so, whether the manifestly apparent lack of

¹⁰⁶ Rejoinder (Conoco), ¶ 21. ↩

[Page 41]

impartiality or independence on the part of that arbitrator could have had a material effect on the award.¹⁰⁷

188. The Parties are in dispute regarding the scope of the Committees’ authority under Article 52(1)(a) when disqualification proposals already have been rejected in the arbitration regarding the impugned arbitrator. Conoco proposes to adopt the standard endorsed by the ad hoc committees in Azurix v. Argentina¹⁰⁸ and OI European v. Venezuela¹⁰⁹ which, having regard to the expression of Article 52(1)(a) “the Tribunal is not properly constituted,” limited the review of ad hoc committees to the constitution of the arbitral tribunal, including the procedure for challenging arbitrators. In the present case, Conoco submits that Venezuela’s challenge should fail as there is no argument concerning the procedure by which the five individual challenges to Mr Fortier and the two challenges to the Tribunal Majority were resolved.¹¹⁰

189. As Venezuela pertinently points out,¹¹¹ ad hoc committees would not be fulfilling their essential mission of ensuring the integrity of the arbitration proceedings and the legitimacy of the award if they shun from reviewing independence and impartiality which directly affect the legitimacy of awards. This was expressed with force by the Eiser committee:

“Thus, in light of the text, context and object and purpose of Article 52(1)(a) of the ICSID Convention, this Committee concludes that, for purposes of determining whether the Tribunal was properly constituted, it has the authority to examine whether the members of the Tribunal were and remained (and were seen to be/remain) impartial and independent throughout the proceedings. The role of an ad hoc committee is to ensure that the integrity of the proceedings and the legitimacy of the award was not undermined. The impartiality and independence of the arbitrators, being an essential requirement for a valid and legitimate award, can, therefore, be assessed in the context of annulment proceedings.”¹¹²

¹⁰⁷ Eiser Annulment Decision, ¶ 180. ↩

¹⁰⁸ Azurix Annulment Decision, ¶ 279. ↩

¹⁰⁹ OI Annulment Decision, ¶ 108. ↩

¹¹⁰ Counter-Memorial (Conoco), ¶¶ 87, 133. ↩

¹¹¹ Memorial (De Jesús), ¶ 16. ↩

¹¹² Eiser Annulment Decision, ¶ 178. ↩

[Page 42]

190. Conoco concedes on the basis of the decisions of the EDF v. Argentine¹¹³ and Suez v. Argentine¹¹⁴ committees, that the substance of an arbitrator challenge may be subject to limited review when the decision not to disqualify the arbitrator is so plainly unreasonable that no reasonable decision-maker could have come to such a decision.¹¹⁵

191. Venezuela¹¹⁶ reminds the decision of the Mobil committee clarifying the role of the remaining members of the tribunal or of the Chair of the Administrative Council under Articles 57 or 58 of the ICSID Convention and that of an ad hoc committee under Article 52(1)(a):

“The Chairman of the Administrative Council assists the parties with difficulties regarding the constitution of the arbitration tribunal during the arbitration procedure. An ad hoc committee plays a very different role. Its mandate under Article 52 of the ICSID Convention is to verify the integrity of the award. Therefore, the impartiality of the arbitral tribunal, which is an essential requirement for the validity of the award, can be assessed in the light of the procedural decisions taken by it in the context of the annulment proceedings. In examining this ground for annulment, the ad hoc Committee does not act as an appellate body in relation to the decision taken by the Chairman of the Administrative Council on a request for disqualification under Article 58 of the ICSID Convention.” ¹¹⁷

192. Whether or not an arbitrator should continue to sit is a matter for the remaining members of the tribunal or the Chair of the Administrative Council under Articles 57 or 58 of the ICSID Convention. When acting as a challenge authority, the other arbitrators or the Chair participate in the efficient and orderly administration of arbitration proceedings under the aegis of ICSID. The disqualification authority resolves difficulties in the constitution of the arbitral tribunal to permit the proceedings to move forward in furtherance of the parties’ intention for an efficient arbitration process under the aegis of ICSID.

193. The ground for annulment under Convention Article 52(1)(a) is a remedy that concerns the award and not the decisions of tribunal members or of the President of the World

¹¹³ EDF Annulment Decision, ¶ 145. ↩

¹¹⁴ Suez Annulment Decision, ¶ 94. ↩

¹¹⁵ Counter-Memorial (Conoco), ¶ 86. ↩

¹¹⁶ Memorial (De Jesús), ¶ 26. ↩

¹¹⁷ Mobil Annulment Decision, ¶ 44. ↩

[Page 43]

Bank in his capacity as Chair of the ICSID Administrative Council made on disqualification proposals under Article 58 of the Convention. This distinction notwithstanding, the Azurix committee suggested that an ad hoc committee should examine the correctness of the procedure followed rather than of the correctness of the decision, doing so on the latter would be tantamount to an appeal against the tribunal’s decision.¹¹⁸ The EDF committee substituted the compliance procedure followed by the body deciding on disqualification with the challenge procedure set out in the ICISD Convention, and adopted a narrow legal review of the reasonableness of the decision on disqualification. EDF falls in line with the same policy followed by Azurix which denies ad hoc committees the possibility to determine whether an arbitrator possesses the requisite qualities of independence and impartiality. The EDF committee viewed this function as being entrusted under Articles 57 and 58 of the Convention to the remaining members of the tribunal or the Chairman of the Administrative Council.¹¹⁹ EDF was decided prior to Eiser which changed the situation, as otherwise, if its ruling had to be followed when no challenge happened in the arbitration, the co-arbitrators should be retroactively asked to decide the challenge, notwithstanding that the award has already been made.

194. Based on the foregoing, Conoco claims that Article 52(1)(a) does not permit a de novo review of the disqualification proposals decided in the underlying arbitration.¹²⁰ When examining the ground of Article 52(1)(a), an ad hoc committee does not review the decisions made by the Chair of the Administrative Council or of the other members of the arbitral tribunal on a proposal to disqualify an arbitrator. An ad hoc committee’s duty under Article 52(1)(a) is to assess the independence and impartiality of the arbitral tribunal which conditions the integrity of the award and not the validity of the decisions of the disqualification authorities. As Venezuela notes,¹²¹ Article 52(1)(a) does not restrict a committee’s powers but requires that, in satisfaction of its mission to

¹¹⁸ Azurix Annulment Decision, (¶ 282): “The Committee further is of the view that an ad hoc committee cannot decide for itself whether or not a decision under Article 58 was correct, as this would be tantamount to an appeal against such a decision”. ↩

¹¹⁹ EDF Annulment Decision, ¶ 144. ↩

¹²⁰ Counter-Memorial (Conoco), ¶ 85. ↩

¹²¹ Reply (De Jesús), ¶ 25. ↩

[Page 44]

safeguard the integrity of the award, a committee verifies whether the members of the arbitral tribunal exercised independent and impartial judgment.

195. Yet, Conoco remarks that the facts denounced by the Applicant in support of its attack against the independence and impartiality of Mr Fortier and Judge Keith are the same as those argued by Venezuela in front of the body deciding the disqualification proposals in its efforts to unseat these two arbitrators during the arbitration. Conoco described the Applicant’s challenge against Mr Fortier as “a single challenge regurgitated four times.”¹²² Venezuela argues that the circumstances underlying its various disqualification proposals should be analysed collectively¹²³ or assessed in the aggregate, rather than in isolation, as the unchallenged members did when they refused to consider the “cumulative record” of prior proposals.¹²⁴ Conoco deplores that Venezuela would be given two bites at the apple and could raise several challenges which individually did not meet the standard for disqualification but on annulment argue that the accumulation of challenges warrants a reassessment by the Committee of the same challenge, as with an appeal, thus distorting the permitted degree of review on annulment, limited, per the EDF standard, to whether the challenge decisions in the arbitration were plainly unreasonable.

196. Venezuela remarks that the Committee, contrary to Conoco’s approach, is not bound by the determinations of prior decisions on disqualifications.¹²⁵ The decisions of the body deciding on the disqualification proposals are not of a judicial type. They have an administrative nature and carry no res judicata effect which would preclude an ad hoc committee from examining an Article 52(1)(a) challenge.

197. The objective of the Committee under Article 52 is entirely different from that of a body deciding on a disqualification proposal whose intervention occurs during the

¹²² Counter-Memorial (Conoco), ¶ 139. ↩

¹²³ Reply (De Jesús), ¶ 38. ↩

¹²⁴ A/R-153 [Curtis] / A/R-174 [De Jesús] Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator, 26 July 2016, (“Challenge Decision - Fortier IV”), ¶¶ 15-17; A/R-148 [Curtis] / A/RLA-49 [De Jesús] Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator, 15 December 2015, (“Challenge Decision - Fortier II”), ¶ 38; Memorial (Curtis), ¶¶ 106-108; Reply (Curtis), ¶¶ 51, 52. ↩

¹²⁵ Reply (De Jesús), ¶ 35. ↩

[Page 45]

arbitration before the making of the award. After the award, the disqualification of an arbitrator becomes without purpose. All that remains to be checked is whether the award was made by independent and impartial arbitrators. The resolution of the isolated incidents by the various decisions on the disqualification proposals cleared the scene at the time they were made, they never purported to, and could not, assess the situation of the arbitrators in the contents of the award. The decisions denying the disqualification proposals may be taken into consideration for our purpose, but it remains a committee’s role to evaluate the integrity of an arbitrator’s situation and comportment during the entire proceedings from the moment the award has been made.¹²⁶ Venezuela adds that the Committee could not determine the unreasonableness of the decisions on disqualification without undertaking a review of the relevant facts and circumstances of the disqualification proposals.¹²⁷ As already noted, the test calls for a reasonable evaluation of the facts of the case for finding a manifest appearance of lack of independence and impartiality. Depending on the outcome of the Committee’s decision under Article 52(1)(a), it can be inferred in retrospect whether the decisions on disqualification reached in the course of the arbitration proceedings could be regarded as plainly unreasonable (or the reverse).¹²⁸

198. In making its analysis under Article 52(1)(a), the Committee observes that this is a case in which the Applicant filed in the underlying arbitration seven disqualification proposals (five directed to the same individual arbitrator and two included an additional arbitrator). Three out of the five arbitrators who sat on the Tribunal participated in decisions regarding its constitution which were later contested by Venezuela under Article 52(1)(a).¹²⁹ An approach limited to the reasonableness of the decisions would be all the more inappropriate in the circumstances as the decision makers are themselves under attack. With this unique background, the Committee finds

¹²⁶ Efficiency would not be served if a committee otherwise had to sift through the circumstances which were reasonably decided by the competent body during the arbitration for identifying the undecided issues left for its own review (see footnote No. 394 infra). ↩

¹²⁷ Reply (De Jesús), ¶¶ 41, 44. ↩

¹²⁸ Thus, the Mobil v. Argentine committee assessed for itself the independence and impartiality of the members of the arbitral tribunal before concluding that the Chairman’s decision was not unreasonable (Mobil Annulment Decision, ¶ 46). ↩

¹²⁹ Mr Fortier, Professor Bucher and Judge Keith. ↩

[Page 46]

compelling reasons to assess if the Tribunal was and remained properly constituted until the rendition of the Award. The Committee is mindful that this approach is limited to the specific circumstances of this actual case and should not be read as an invitation for disputing parties in other cases to file multiple disqualification proposals to later seek annulment of the award for alleged improper constitution of the tribunal.

199. The Committee will examine in Section VII A.3 whether an Award rendered by an Arbitral Tribunal composed of Mr Fortier, Judge Keith and Professor Bucher withstands the Applicant’s criticisms.

(b) Article 52(1)(b) – Manifest Excess of Powers

200. Article 52(1)(b) involves an excess of powers which must be manifest. The ground applies to issues of jurisdiction and merits alike, no distinction being made between these issues in Article 52. Some ad hoc committees have approached Article 52(1)(b) with a two-step analysis which requires, first to determine whether there had been an excess of powers, followed by assessing whether the excess of powers is also manifest. Others have considered a prima facie test under which a summary examination should be made to ascertain whether any alleged excess of powers is so egregious as to be manifest. Manifest may thus mean plain or evident, discernible without in-depth analysis. It may also refer to the strength or seriousness of the excess of powers.¹³⁰ Whichever the approach, the reprehensible excess of powers should not give rise to discussion. Hence the consensus of ad hoc committees is that a plausible, debatable or otherwise tenable decision escapes annulment. It follows that there is general agreement that errors of law are not deficiencies for Article 52(1)(b) purposes.

(c) Article 52(1)(d) – Serious Departure from a Fundamental Rule of Procedure

201. Article 52(1)(d) involves a departure, which must be serious, from a rule of procedure, which must be of a fundamental nature. Rules of natural justice concern the fairness and adversarial nature of the proceedings, and not all arbitration rules, are protected

¹³⁰ A/RLA-42 [Curtis] / A/RLA-6 [De Jesús], Updated Background Paper on Annulment for the Administrative Council of ICSID (“ICSID Annulment Paper”). ↩

[Page 47]

under Article 52(1)(d). As an example, the independence and impartiality of the arbitral tribunal is one of the facets of natural justice and due process. The right to an independent and impartial arbitral tribunal is recognized in the decisions of ad hoc committees as participating in the fundamental exigencies of a fair trial whose integrity is protected under Article 52(1)(d).¹³¹

202. The focus of an Article 52(1)(d) enquiry is not whether the arbitrators committed a fault in the arbitral process or could have done things differently, but whether the proceedings were conducted in a fair manner. A serious departure refers to meaningful breaches of the rules of natural justice which cause prejudice. The Applicant is not required to demonstrate that the award would have been different, absent the departure from the procedural rule. An immaterial breach which had no consequence will not justify an annulment of the Award.

(d) Article 52(1)(e) – Failure to State Reasons

203. The statement of reasons which is required by Article 52(1)(e) is the parties’ guarantee against arbitrariness. Parties are entitled to be told why they have won or lost. The persuasiveness or the quality of the reasons escape the enquiry under Article 52(1)(e). The arbitral tribunal should deal with all issues that have a conclusive nature, rather than each and every argument made by the parties. It is accepted practice under Article 52(1)(e) that insufficient, inadequate or contradictory reasons which cancel each other are regarded as an absence of reasons. An ad hoc committee is not required to assiduously comb the award for Article 52(1)(e) purposes. Rather, an award should be read generously. If the motivation can be discerned or inferred from the context, there is no failure to state reasons.

¹³¹ Memorial (De Jesús), ¶¶ 103-104; Klöckner Annulment Decision, ¶ 95; Wena Annulment Decision, ¶ 57; Impregilo Annulment Decision, ¶ 165; EDF Annulment Decision, ¶ 123; Eiser Annulment Decision, ¶ 254. Counter-Memorial (Conoco), ¶ 169: “independence and impartiality of an arbitrator is a fundamental rule of procedure.” ↩

[Page 48]

VII. THE GROUNDS INVOKED

A. GROUNDS RELATED TO THE TRIBUNAL COMPOSITION: IMPROPER CONSTITUTION AND SERIOUS DEPARTURE

204. Venezuela submits that the Tribunal was improperly constituted (A.1) because (a) arbitrators Fortier and Keith could not be relied upon to exercise independent judgment, and, that Venezuela’s disqualification proposals should have been sustained; and (b) arbitrator Bucher was improperly appointed since Venezuela had the right to appoint a replacement arbitrator after arbitrator Abi-Saab’s resignation. Relying on the same facts, Venezuela also submits that there was a serious departure from a fundamental rule of procedure (A.2).

205. Regarding (a), Conoco counters that Venezuela is asking the Committee to make a de novo review of each of the decisions made on the failed disqualification proposals that Venezuela filed against Arbitrator Fortier individually,¹³² and against Arbitrators Fortier and Keith as the Tribunal majority.¹³³ Regarding (b), Conoco argues that Venezuela had no right to appoint a replacement arbitrator because the Tribunal did not consent to Prof. Abi-Saab’s resignation.¹³⁴

A.1. THE PARTIES’ POSITIONS ON THE IMPROPER CONSTITUTION

206. Venezuela invokes several arguments to support its contention that Arbitrators Keith and Fortier could not be relied upon to exercise impartial and independent judgment, that the appointment of Arbitrator Bucher was improper, and that the Committee should annul the Award for improper constitution.

¹³² On 5 October 2011 Venezuela proposed to disqualify arbitrator Fortier. On 27 February 2012, the Tribunal majority, composed of arbitrators Keith and Abi-Saab, dismissed the proposal. ↩

¹³³ On 11 March 2014 Venezuela proposed to disqualify arbitrators Fortier and arbitrator Keith. On 6 February 2015 Venezuela again proposed to disqualify arbitrator Fortier and on 25 March 2015 Venezuela extended its proposal to also seek the disqualification of arbitrator Keith. ↩

¹³⁴ Counter-Memorial (Conoco), ¶ 5. ↩

[Page 49]

207. The Committee will first summarize the arguments advanced by Venezuela as represented by Curtis (A.1(1)); then by Venezuela as represented by De Jesús (A.1(2)) and then by the Conoco Parties (A.1(3)) in relation to (i) the disqualification proposals of arbitrator Fortier; (ii) the disqualification proposals of Arbitrators Fortier and Keith; and (iii) the appointment of Arbitrator Bucher. The Committee’s analysis on this ground is in Section A. 1(4).

A.1(1) IMPROPER CONSTITUTION AS ARGUED BY VENEZUELA (CURTIS)

i. Arbitrator Fortier

(a) Arbitrator Fortier’s failure to disclose the merger between Norton Rose and Macleod Dixon

208. For Venezuela, the accumulation of circumstances would have justified the disqualification of Arbitrator Fortier.¹³⁵ On 4 October 2011, Arbitrator Fortier disclosed the plans of his (then) law firm, Norton Rose, OR LLP to merge with Canadian law firm Macleod Dixon LLP. Arbitrator Fortier disclosed that he had learned that the Caracas office of Macleod Dixon was providing services to Conoco, acting adverse to Venezuela’s interests in certain matters, and acting on behalf of Conoco in certain ICC proceedings against Petróleos de Venezuela (PDVSA).¹³⁶ On 5 October 2011, Venezuela proposed to disqualify Arbitrator Fortier as a result of his disclosure.

209. Venezuela asked Arbitrator Fortier to answer six questions, including the extent of Macleod Dixon’s relationship with the Conoco Parties, the identity of the private oil companies represented by Macleod Dixon in connection with the migration of oil projects to Empresas Mixtas in 2007 and the nature of those assignments. Venezuela notes that Macleod Dixon continued to represent the Conoco Parties after the merger in an arbitration against PDVSA where the same Hamaca and Petrozuata Association

¹³⁵ Memorial (Curtis), ¶ 108. Tr. Hr. Day 1, 141:12-14. ↩

¹³⁶ A/R-52 [Curtis] / A/R-93 [De Jesús], E-mail from Mr. Fortier to Meg Kinnear, Secretary-General of ICSID, dated 4 October 2011 (“Fortier email to ICSID SG”). ↩

[Page 50]

Agreements were disputed. Freshfields was Macleod Dixon’s co-counsel in that case.¹³⁷

210. On 18 October 2011, Arbitrator Fortier indicated he had not been involved in the negotiation leading to the merger and had no knowledge of the information sought in questions (i) to (v).¹³⁸ He also announced his resignation from Norton Rose, effective on 31 December 2011, and he would “thus cease to earn any remuneration from Norton Rose.”¹³⁹He also stated that there were members of Norton Rose who had assisted him in certain files in which he served as arbitrator, whom he may continue to call upon for assistance after 1 January 2012. He indicated that the only person who had assisted him in the case was Ms. Bendayan, a Norton Rose junior associate.¹⁴⁰

211. On 27 February 2012, after the Parties had a chance to submit further observations on the proposal, Arbitrators Keith and Abi-Saab rejected the disqualification proposal.

212. Venezuela submits that Arbitrator Fortier’s obligation to disclose arose long before the merger. The merger involved long negotiations between his then firm and a firm that was acting (and continued to act) adverse to Venezuela and PDVSA and acted as Freshfields’ co-counsel against PDVSA.¹⁴¹ Venezuela also maintains that Arbitrator’s Fortier disclosure revealed an intention to remain at Norton Rose, and he resigned only after Venezuela filed to disqualify him and asked him questions.¹⁴²

213. Venezuela submits that its first challenge was based on actual and objective facts that were undisputed, and instead of resigning as arbitrator, Mr. Fortier opted to resign from his (then) firm.¹⁴³

¹³⁷ Memorial (Curtis), ¶¶ 9-11. ↩

¹³⁸ A/R-53 [Curtis] / A/R-94 [De Jesús], Mr. Fortier’s Letter of 18 October 2011, p. 2 (“Fortier October letter to co-arbs”). ↩

¹³⁹ Memorial (Curtis), ¶ 11; A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs, p. 1. ↩

¹⁴⁰ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs, p. 2. ↩

¹⁴¹ Memorial (Curtis), ¶ 15. ↩

¹⁴² Memorial (Curtis), ¶ 17. ↩

¹⁴³ Memorial (Curtis), ¶ 18. ↩

[Page 51]

(b) Arbitrator Fortier’s continued ties with Norton Rose

214. Venezuela maintains that Arbitrator Fortier kept ties with Norton Rose, which he failed to disclose. In the arbitration Yukos v. The Russian Federation presided by him, Arbitrator Fortier was assisted by a Norton Rose partner, Mr. Valasek. The respondent in that case questioned Mr. Valasek’s assistance as exceeding mere administrative work.¹⁴⁴

215. On 29 January 2015, Venezuela asked Arbitrator Fortier to disclose the extent of his relationship with Norton Rose. On 3 February 2015 Arbitrator Fortier replied that he had ceased any professional relationship with the firm, and had since January 2012 pursued a career as an independent arbitrator and was a door tenant at 20 Essex Street in London and a member of Arbitration Place in Toronto.¹⁴⁵

216. On 6 February 2015, Venezuela proposed to disqualify Arbitrator Fortier.

217. On 16 April 2015, Arbitrator Fortier furnished explanations in connection with another proposal for disqualification filed on 25 March 2015 by Venezuela (concerning Arbitrators Keith and Fortier). In these explanations, arbitrator Fortier described Mr. Valasek’s role and disclosed he was being assisted in another ICSID case by a Norton Rose lawyer, Ms. Fitzgerald. On 1 June 2015, upon Venezuela’s insistence, he also disclosed that Ms. Bendayan, had assisted him in another ICSID case until the issuance of the decision on Jurisdiction in February 2013.¹⁴⁶

218. Venezuela submits that Arbitrator Fortier from the beginning made incomplete, misleading, and inaccurate disclosures despite Venezuela’s repeated requests and he did not fully sever ties with Norton Rose.¹⁴⁷

¹⁴⁴ Memorial (Curtis), ¶¶ 27, 28 ↩

¹⁴⁵ A/R-131 [Curtis] / A/R-177 [De Jesús], E-mail of 3 February 2015, from Gonzalo Flores, (then) Secretary of the Tribunal to the Parties, forwarding Mr. Fortier’s response of the same day. ↩

¹⁴⁶ Memorial (Curtis), ¶ 42. ↩

¹⁴⁷ Memorial (Curtis), ¶44. ↩

[Page 52]

219. On 1 July 2015, the Chair of the Administrative Council rejected the proposal to disqualify Arbitrator Fortier.¹⁴⁸ Venezuela argues that the Chair simply adopted Arbitrator Fortier’s position. It also argues arbitrator Fortier’s relationship with Norton Rose and assistance from Norton Rose lawyers was still ongoing as he admitted in his disclosure of 18 October 2011 that he may call certain members of the firm for administrative assistance.

220. Venezuela’s view is that the Chair failed to explain how the 2011 disclosure “could constitute carte blanche for Mr. Fortier to continue his extensive substantive relationships with Norton Rose attorneys.”¹⁴⁹Venezuela also criticizes the Chair’s observation that the allegations concerning Mr. Valasek were irrelevant because the Yukos case was unrelated to this one. For Venezuela, that observation missed the fact that Arbitrator Fortier “had a continuing, substantive and extensive professional relationship with a partner of Norton Rose whose opinions and writings on international law issues of direct relevance to this case were adverse to Venezuela and even cited by the Conoco Parties in their pleadings.”¹⁵⁰

221. In its Reply, Venezuela rebutting Conoco’s de novo review argument asks the Committee to decide if under the cumulative circumstances giving rise to the earlier challenges, it was plainly unreasonable to allow Arbitrator Fortier to remain on the Tribunal.¹⁵¹ Venezuela argues that prior arbitrators deciding on the challenges missed the point, and it was not that prior challenges or facts should be reconsidered, but that all facts should be considered together as if there were only one challenge based on cumulative facts in the record.¹⁵²

222. Here, the decisions rejecting the disqualifications of Arbitrator Fortier were plainly unreasonable, due to the repeated inaccurate, incomplete and/or misleading disclosures

¹⁴⁸ In the meantime, on 20 February 2015, arbitrator Abi-Saab resigned. At the time of arbitrator Abi-Saab’s resignation, he and arbitrator Keith had not yet decided Venezuela’s pending proposal to disqualify arbitrator Fortier. ↩

¹⁴⁹ Memorial (Curtis), ¶ 47. ↩

¹⁵⁰ Memorial (Curtis), ¶ 48. ↩

¹⁵¹ Reply (Curtis), ¶ 117. ↩

¹⁵² Reply (Curtis), ¶ 116. ↩

[Page 53]

of Arbitrator Fortier. Also, this case is not merely about non-disclosure, but about affirmative disclosure which time after time was proven to be inaccurate, incomplete or misleading. Arbitrator Fortier was permitted to stay in the Tribunal due to the application of the wrong standard. The mentioned decisions judged each challenge individually in isolation from whatever facts came before and were the object of prior challenges.¹⁵³

223. Venezuela also submits that, despite Conoco’s contention to the contrary, Venezuela did not raise challenges that were irresponsible or opportunistically timed. The challenges arose from arbitrator Fortier’s inaccurate, incomplete, and misleading disclosures. Venezuela also argues that the situation in this case, with Macleod Dixon, and the Conoco Parties is even more serious than that in the Loewen arbitration, from which Arbitrator Fortier resigned. In that case, the United States challenged him following the proposed merger of his firm (which did not materialize) with another firm that previously acted for the claimants.¹⁵⁴ Further, the challenges arose from Arbitrator Fortier’s fortuitous disclosures of circumstances that should have been earlier disclosed by him. Venezuela raised the disqualification proposals promptly after learning of the relevant circumstances and was not aimed at causing any delay.¹⁵⁵

ii. Arbitrators Keith and Fortier

(a) Refusal to reconsider Decision on Jurisdiction and Liability

224. On 11 March 2014, Venezuela proposed to disqualify Arbitrators Keith and Fortier. Venezuela’s proposal was prompted by their refusal to reconsider the Decision on Jurisdiction and the Merits of 3 September 2013, made by the Tribunal Majority Arbitrators Keith and Fortier, with Arbitrator Abi-Saab dissenting.¹⁵⁶In their Decision, the Tribunal Majority found that Venezuela had failed to negotiate the compensation

¹⁵³ Reply (Curtis), ¶¶ 51-53 ↩

¹⁵⁴ Reply (Curtis), ¶¶ 90, 91. ↩

¹⁵⁵ Reply (Curtis), ¶ 97. ↩

¹⁵⁶ Memorial (Curtis), ¶ 19. ↩

[Page 54]

for the 2007 oil nationalization in good faith by reference to the BIT’s standard of market value.¹⁵⁷ Arbitrator Abi-Saab dissented on that point.¹⁵⁸

225. On 8 September 2013, Venezuela requested that the Tribunal reconsider its Decision on the ground that the Decision was “based largely on certain misapprehensions [...] [was] unsustainable both as a matter of fact and as matter of law.”¹⁵⁹ For Venezuela the correction of any of the errors of the Decision would change the conclusion on the issue of bad faith negotiation.¹⁶⁰

226. In its request for reconsideration, Venezuela referenced, among other alleged errors, evidence introduced after the 2010 main hearing, namely, leaked U.S. Embassy cables reporting on the briefing made by the ConocoPhillips negotiators to the U.S. Embassy in Caracas. Venezuela submits that the U.S. Embassy cables proved that the Conoco Parties made false representations to the Tribunal regarding Venezuela’s supposed unwillingness to negotiate compensation based on fair market value.¹⁶¹

227. On 10 March 2014, the Majority of the Tribunal, composed of Arbitrators Keith and Fortier, rejected Venezuela’s request for reconsideration. Arbitrator Abi-Saab dissented, stating, among others, that “I don’t think that any self-respecting Tribunal [...] can pass over such evidence, close its blinkers and proceed to build on its now severely contestable findings, ignoring the existence and the relevance of such glaring evidence.¹⁶²

228. Venezuela proposed to disqualify Arbitrators Keith and Fortier arguing that their refusal to reconsider the September 2013 Decision, regardless of the facts showed,

¹⁵⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, 3 September 2013, (“Decision on Jurisdiction and the Merits”), ¶ 394. ↩

¹⁵⁸ A/R-4 [Curtis] / A/R-45 [De Jesús], Dissenting Opinion of Prof. Georges Abi-Saab to the Decision on Jurisdiction and the Merits of 3 September 2013, 19 February 2015, (“Abi-Saab Dissenting Opinion”), ¶ 85. ↩

¹⁵⁹ R-313, Respondent’s Letter to the Tribunal, 8 September 2013, p. 1. ↩

¹⁶⁰ Memorial (Curtis), ¶ 21. ↩

¹⁶¹ Memorial (Curtis), ¶ 21, referring to A/R-42 [Curtis], Respondent’s Memorial in Support of Proposal to Disqualify Judge Keith and Mr. Fortier, 21 March 2014, ¶ 10. ↩

¹⁶² A/R-41 [Curtis] / A/R-82 [De Jesús], Dissenting Opinion of Professor Georges Abi-Saab to the Decision on Respondent’s Request for Reconsideration, 10 March 2014, (“Abi-Saab Dissenting Opinion – Reconsideration Request”), ¶ 66. ↩

[Page 55]

created at least the appearance of bias in the mind of any reasonable third party.¹⁶³Venezuela submits that the basis for its disqualification proposal related to the nature of the decision-making process and the resulting rulings (with arbitrators refusing to consider the indisputable documentary evidence and misrepresentations made by the other party) and was not merely disagreement on legal and factual issues.¹⁶⁴

229. On 5 May 2014, the Chairman of the Administrative Council rejected the proposal.¹⁶⁵Venezuela submits that the Chair failed to address the merits of the proposal. Venezuela argues that the Chair simply found that the Tribunal, acting within its discretion, had adopted a reasonable procedure to deal with the request for reconsideration and that nothing in the Tribunal’s reasoning or conclusions suggested a lack of impartiality. Venezuela also notes that the Chair’s decision did not mention the observations Arbitrator Abi-Saab made in his dissent.¹⁶⁶

230. In its Reply, Venezuela rebuts Conoco’s argument that the request for reconsideration had no foundation in law or fact or the ICSID procedure. Venezuela submits that it should not be necessary to cite authority for the basic proposition that a tribunal may reconsider its own interim decision in case still pending before it, the more so, if it was based on false premises. Venezuela also argues that, when referring to its application for reconsideration, Conoco Parties disregarded the fact that Venezuela had introduced incontrovertible evidence of Venezuela’s good faith negotiation per the BIT standard. Even Prof. Abi-Saab’s dissent pointed to the obvious facts that Arbitrators Keith and Fortier overlooked. Venezuela filed its challenge the next day, based on the refusal to reconsider the merits of the application which reflected a lack of impartiality, fully aware that mere disagreement with a decision was not grounds for disqualification.¹⁶⁷

¹⁶³ Memorial (Curtis), ¶ 23. ↩

¹⁶⁴ Memorial (Curtis), ¶ 24. ↩

¹⁶⁵ A/R-127 [Curtis] / A/R-181 [De Jesús], Decision on the Proposal to Disqualify a Majority of the Tribunal, 5 May 2014 (“Challenge Decision – Majority I”). ↩

¹⁶⁶ Memorial (Curtis), ¶ 25. ↩

¹⁶⁷ Reply (Curtis), ¶¶ 119-123. ↩

[Page 56]

(b) The withdrawal of consent to Arbitrator’s Abi-Saab resignation

231. On 25 March 2015, Venezuela proposed to disqualify Arbitrators Keith and Fortier. At that point, another disqualification proposal filed by Venezuela individually with respect to Arbitrator Fortier was pending (proposal of 6 February 2015) and the proceeding had been suspended.

232. For the disqualification proposal of arbitrators Keith and Fortier, Venezuela submitted, relying on Arbitrator Abi-Saab’s comments, that they had displayed a negative general attitude vis-à-vis Venezuela, had advanced the interests of the Claimants and relied almost exclusively on their representations, which included flagrant misrepresentations of fact.¹⁶⁸Venezuela submitted that their denial of consent to Arbitrator Abi-Saab’s resignation reaffirmed their appearance of lack of impartiality. For Venezuela, their denial should have led to disqualification.¹⁶⁹

233. In its written pleadings, Venezuela (Curtis) speaks of the purported “withdrawal” of consent to Arbitrator Abi-Saab’s resignation following the delivery of this dissent.¹⁷⁰Venezuela submits that Arbitrator Abi-Saab resigned for serious health reasons and that Arbitrators Keith and Fortier knew that he wished to resign for those reasons after submitting his dissent. Venezuela relies on a letter from Arbitrator Keith to the Parties, stating that “[...] [o]ver a lengthy period the two Arbitrators, particularly the President, have urged Professor Abi-Saab to complete his dissent and then, as he had himself indicated, to resign from the Tribunal so that the Respondent could appoint a replacement arbitrator [...]. In the course of those exchanges, the two Arbitrators plainly did consent to the proposed resignation.”¹⁷¹

234. Arbitrator Abi-Saab submitted his dissent on 19 February 2015, to the September 2013 Decision on Liability and Merits (the “19 February 2015 Dissent”) and resigned the

¹⁶⁸ A/R-125 [Curtis] / A/R-98 [De Jesús], Respondent’s Submission on the Proposal to Disqualify Judge Keith and Mr. Fortier, 2 April 2015, ¶ 3. ↩

¹⁶⁹ Memorial (Curtis), ¶¶ 49, 120. ↩

¹⁷⁰ See for example, Memorial (Curtis), ¶¶ 56, 116, 117, 147; Reply (Curtis), ¶ 133. ↩

¹⁷¹ A/R-61 [Curtis] / A/R-102 [De Jesús], Letter from Gonzalo Flores, Secretary of the Tribunal, to the Parties, (“ICSID March letter”), 4 March 2015. ↩

[Page 57]

next day. Venezuela affirms, however, that after submitting his dissent Arbitrators Keith and Fortier withdrew their consent to the resignation. For Venezuela, it seems likely that they were influenced by Arbitrator Abi-Saab’s dissent. This, Venezuela submits, was inexcusable, even if Arbitrator Abi-Saab’s dissent played no role in their decision.¹⁷²

235. The Chair of the Administrative Council considered that there was no proof of bias because Arbitrators Keith and Fortier sought comments from the Parties on the resignation, who submitted conflicting views on the correct procedure and outcome. The Arbitrators had considered these views and issued an informed decision on 4 March 2015, when they communicated to the Parties that they did not consent to Arbitrator Abi-Saab’s resignation. The Chairman also noted that arbitrator Abi-Saab had indicated that he would complete his dissent by the end of November 2014 and resign by the end of 2014; yet his resignation was not tendered until 20 February 2015, seven weeks before the quantum hearing and when the disqualification proposal against Arbitrator Fortier remained pending.¹⁷³

236. Venezuela questions that the Chair’s decision ignored that Arbitrators Keith and Fortier had unconditionally (“plainly”) consented to the resignation, and that Arbitrator Keith had urged Arbitrator Abi-Saab to resign by 6 February 2015, not 31 December 2014.¹⁷⁴

237. In Venezuela’s view, the Chair’s decision failed to deal with the fact that Arbitrators Keith and Fortier asked for the Parties’ comments related to the issues that formed the basis for the challenge, that it was inappropriate for Arbitrator Fortier, who was subject to a challenge, to take part in a decision, and that the Tribunal was in no position to decide anything, as the proceeding was suspended since 6 February 2015, when Venezuela proposed to individually disqualify arbitrator Fortier.¹⁷⁵

¹⁷² Reply (Curtis), ¶133. ↩

¹⁷³ Memorial (Curtis), ¶¶54-56. ↩

¹⁷⁴ Memorial (Curtis), ¶ 56. ↩

¹⁷⁵ Reply (Curtis), ¶¶ 54-56; Reply (Curtis), ¶ 133. ↩

[Page 58]

238. Having restated the factual background underlying the seven disqualification proposals made against Arbitrator Fortier,¹⁷⁶ Venezuela submits in support of its annulment ground concerning Arbitrators Fortier and Keith that the facts questioning an arbitrator’s independence and impartiality must not be considered in isolation but cumulatively, which the repeated decisions dismissing the disqualification proposals to Arbitrator Fortier failed to do.¹⁷⁷

239. In its Reply, Venezuela argues, among others, that the Chairman considered the facts in isolation, disconnected from the circumstances underlying the prior challenges. Had the correct standard been applied, Arbitrators Fortier and Keith should have been disqualified.¹⁷⁸

iii. The Appointment of Arbitrator Bucher

240. Convention Article 56(3) provides that where consent to the resignation of a party-appointed arbitrator is denied, the Chair of the Administrative Council shall appoint the replacement from a person from the Panel. Venezuela submits that the purpose of Convention Article 56(3) is to prevent a party and its appointed arbitrator from obstructing the proceeding by orchestrating a resignation, not to penalize a party by depriving its right to appoint. Venezuela supports this with various excerpts from the Travaux Préparatoires and commentaries on the ICSID Convention.¹⁷⁹

241. Venezuela then refers to other four cases where the resignation of a party-appointed arbitrator has not been accepted (Holiday Inns v. Morocco; Pey Casado v. Chile; Enron v. Argentina; Toto Construzioni v. Lebanon). Venezuela distinguishes these cases, pointing out that Arbitrator Abi-Saab’s resignation was made for health reasons and not under pressure of the party who had appointed him; not under collusion with that party; or with a party prevailing on the arbitrator to resign to slow down the proceeding or to get a replacement by a more tractable person; or resigning for tactical purposes or

¹⁷⁶ Memorial (Curtis), ¶¶ 3-85. ↩

¹⁷⁷ Memorial (Curtis), ¶¶ 107, 108, 117. ↩

¹⁷⁸ Reply (Curtis), ¶¶ 126, 127. ↩

¹⁷⁹ Memorial (Curtis), ¶ 149. ↩

[Page 59]

following instructions from a government party. When the resignation is for a good cause, it follows from the Travaux Préparatoires that the other tribunal members would consent.¹⁸⁰

242. However, in this case, Venezuela argues, those principles were not followed. The denial of consent, or rather the purported withdrawal of the consent which had been “plainly” given to Arbitrator Abi-Saab’s resignation with the resulting appointment of a replacement arbitrator by the Chairman constitute a ground for annulment for improper constitution under Article 51(1)(a). This purported withdrawal of consent constitutes a serious departure from a fundamental rule of procedure (see Section A.2(1) below).¹⁸¹

243. In its Reply, Venezuela argues, among others, that the Conoco Parties do not dispute the fact that there never has been a denial of consent to a resignation for serious health reasons; and yet, they submit the Committee has no power to judge the legitimacy of the reasons behind the Tribunal’s exercise of discretion under Convention Article 56(3) and Rule 8(2). This, Venezuela submits, is an untenable proposition, according to which no matter the circumstances, or the reasons for denying consent, or the inappropriate arbitrator conduct, the denial of consent followed by the denial to appoint a replacement arbitrator cannot be grounds for annulment.¹⁸²

244. Venezuela also counters that it is shameful for the Conoco Parties to now seem to suggest that Arbitrator Abi-Saab was in good health pointing out that after his resignation, he attended a conference at which he was honored. Venezuela notes that one thing is to be honored at a conference, another thing is to serve the functions and carry the burdens of an arbitrator in a massive arbitration.¹⁸³

245. On Conoco’s point that Venezuela did not challenge the replacement arbitrator, Mr. Bucher, Venezuela replies that the issue is not whether Mr. Bucher could be challenged

¹⁸⁰ Memorial (Curtis), ¶¶ 150-153. ↩

¹⁸¹ Memorial (Curtis), ¶ 154. ↩

¹⁸² Reply (Curtis), ¶ 134. ↩

¹⁸³ Reply (Curtis), ¶ 135. ↩

[Page 60]

based on personal qualifications, but whether Venezuela was deprived of its right to appoint an arbitrator of its choice, who certainly would not have been Mr. Bucher. Venezuela then refers to submissions it made in the arbitration expressing that it did not accept the appointment of Mr. Bucher.¹⁸⁴

A.1(2) IMPROPER CONSTITUTION AS ARGUED BY VENEZUELA (DE JESÚS)

246. In its Reply, Venezuela reiterates that the standard of the review requires the Committee to assess the facts and circumstances in the arbitration and determine whether the Tribunal members were and remained impartial and independent, without regard to earlier decisions on proposals for disqualification.¹⁸⁵ Venezuela submits that (i) Arbitrator Fortier should have been disqualified for his relationship with Norton Rose OR LLP and that (ii) Arbitrators Keith and Fortier, together, demonstrated a general negative attitude towards Venezuela.¹⁸⁶

i. Arbitrator Fortier

(a) Circumstances related to the Norton Rose – Macleod Dixon merger.

247. Venezuela submits that Arbitrator Fortier should have been disqualified at an early stage, since October 2011, because of his relationship with Norton Rose. Venezuela explains that it expects Arbitrator Fortier to resign from the Tribunal as a result of the conflict of interests arising from the Norton Rose-Macleod Dixon merger.¹⁸⁷

248. Venezuela points out that Arbitrator Fortier accepted his appointment on 20 February 2008 when he was partner of Ogilvy Renault. At that point he made no disclosure. He nevertheless had the continuing obligation to disclose should there be any relationship or circumstance that could call his independence or impartiality into question. On 4 October 2011, with the merger which would become effective 1 January 2012, Arbitrator Fortier indicated that he had learned that Macleod Dixon’s Caracas office

¹⁸⁴ Reply (Curtis), ¶¶ 138. 139. ↩

¹⁸⁵ Reply (De Jesús), ¶ 117. ↩

¹⁸⁶ Reply (De Jesús), ¶ 115. ↩

¹⁸⁷ Memorial (De Jesús), ¶¶ 34, 40. ↩

[Page 61]

was representing ConocoPhillips in certain matters, including ICC cases involving Petróleos de Venezuela S.A., and that Macleod Dixon was also acting adverse to Venezuela in some other matters. Arbitrator Fortier indicated he had made the disclosure at the first possible opportunity after the merger had been voted favorably, and that he did not consider these facts had any bearing on his ability to exercise independent judgment.¹⁸⁸

249. Venezuela argues that any reasonable observer would have considered the above facts and relationships to raise justifiable doubts as to arbitrator Fortier’s independence and impartiality. Also, the fact that Macleod Dixon acted as co-counsel with Freshfields, the Conoco Parties’ counsel, only aggravated the matter, in support of an apparent bias incompatible with the ICSID Convention requirements of independent judgment.¹⁸⁹In its Reply, Venezuela argues that any reasonable observer would consider an apparent bias arising from the fact that Mr. Fortier’s firm had publicly aligned its interest with a firm: (i) that was contemporaneously acting on behalf of ConocoPhillips in other cases; (ii) that was representing ConocoPhillips in a parallel ICC arbitration dealing with the same facts, subject matter and Association Agreements; (iii) was actively representing several claimants against Venezuela and PDVSA and its subsidiaries.¹⁹⁰

250. Venezuela also questions the fact that Arbitrator Fortier did not resign from the Tribunal but instead resigned from his firm, Norton Rose.¹⁹¹ Also, with his resignation, he sought to provide assurance that his ties with the law firm had ceased, and yet he continued his relationship with Norton Rose after his resignation became effective on 1 January 2012.¹⁹²

251. Venezuela counters that the Conoco Parties omits the undeniable issue that there was a serious and extensive conflict of interest arising from the announced merger which was belatedly revealed by Arbitrator Fortier on 4 October 2011. Arbitrator Fortier also failed

¹⁸⁸ Memorial (De Jesús), ¶ 35. ↩

¹⁸⁹ Memorial (De Jesús), ¶ 36. ↩

¹⁹⁰ Reply (De Jesús), ¶ 129. ↩

¹⁹¹ Memorial (De Jesús), ¶ 38. ↩

¹⁹² Reply (De Jesús), ¶ 131. ↩

[Page 62]

his legal obligation under Convention Articles 14 and 57 to disclose the conflict of interest as soon as he became aware of it. Venezuela notes that the law firm partners had voted on the merger at least twice when arbitrator Fortier disclosed the situation.¹⁹³

252. Venezuela also rebuts Conoco’s critique that Venezuela’s inquiries into Arbitrator Fortier were inappropriate procedural behavior.¹⁹⁴ It was only after Venezuela’s requests for information that arbitrator Fortier announced his resignation from Norton Rose, and conceded he was aware of the conflicts of interests resulting from the merge a week before his initial disclosure on 4 October 2011.¹⁹⁵

253. Venezuela also argues that the first disqualification decision failed to consider the circumstances surrounding the merger as creating an appearance of bias. The disqualification decision only evaluated the accuracy of Arbitrator Fortier’s disclosures of October and November 2011.¹⁹⁶ The decision also failed to determine that Arbitrator Fortier had an ongoing duty to disclose and investigate potential conflicts of interest where a law firm merger was to occur.¹⁹⁷ The decision contravened the terms of Arbitration Rule 6, especially the prompt notice requirement, and wrongly limited the duty of disclosure to when an actual conflict of interest exists.¹⁹⁸ Also, the decision cannot be considered reasonable, as it excused Arbitrator Fortier’s lack of investigation due to his lack of actual knowledge of the circumstances. Yet, as General Standard 7(c) of the IBA Guidelines states, a lack of knowledge does not excuse a failure to disclose if the arbitrator made no reasonable attempt to investigate.¹⁹⁹

(b) Arbitrator Fortier’s continued ties with Norton Rose

254. Venezuela further argues that Arbitrator Fortier offered only a partial explanation regarding his ties with Norton Rose. Venezuela submits that, after leaving the firm,

¹⁹³ Reply (De Jesús), ¶¶ 123-128. ↩

¹⁹⁴ Reply (De Jesús), ¶ 132, referring to Counter-Memorial (Conoco), ¶ 148. ↩

¹⁹⁵ Reply (De Jesús), ¶ 134. ↩

¹⁹⁶ Reply (De Jesús), ¶¶ 136-147. ↩

¹⁹⁷ Reply (De Jesús), ¶¶ 148-166. ↩

¹⁹⁸ Reply (De Jesús), ¶¶ 151-155. ↩

¹⁹⁹ Reply (De Jesús), ¶¶ 157-164. ↩

[Page 63]

Arbitrator Fortier maintained a substantive professional relationship with Norton Rose’s senior lawyers, which he failed to disclose. Arbitrator Fortier kept a close relationship with Mr. Valasek, partner at Norton Rose who was his assistant in the Yukos case, and with Ms Fitzgerald and Ms. Bendayan who assisted him in other cases.²⁰⁰Venezuela argues that Arbitrator Fortier made misleading and incorrect statements and misrepresentations, while he was fully aware of his continued professional and financial ties with Norton Rose. Venezuela submits that this failure to disclose forms “part or pattern of circumstances” that should have prevented Arbitrator Fortier from continuing to sit in the Tribunal. In Venezuela’s view, the failure to disclose and the misrepresentations raised serious doubts as to Arbitrator Fortier’s reliability to exercise independent judgment in the arbitration.²⁰¹

255. For Venezuela, the Committee’s task under Article 52(1)(a) of the Convention is unaltered by the decisions of the unchallenged Tribunal Members rejecting the disqualification proposals, and the Committee should not “accept that they can be seized with a ‘cumulative record’”²⁰²Venezuela recalls that the standard set by the EDF committee for assessing independence and impartiality under Article 14(1) is that of “a ‘reasonable third person, with knowledge of all the facts.’”²⁰³

256. In its Reply, Venezuela notes that its second to fifth disqualification proposals were all related to the professional relationship Arbitrator Fortier kept with Norton Rose despite him knowing that the firm was representing ConocoPhillips and other claimants in matters against Venezuela and PDVSA and its subsidiaries.²⁰⁴

257. Venezuela argues that none of the decisions on the second, third, fourth and fifth proposals examined or assessed the ongoing relationship Arbitrator Fortier had with Norton Rose, instead, the Chair of the Administrative Council dismissed them without deciding on their merits. The Chaironly assessed the “new information” concerning Mr.

²⁰⁰ Memorial (De Jesús), ¶¶ 49-55. ↩

²⁰¹ Memorial (De Jesús), ¶ 57. ↩

²⁰² Memorial (De Jesús), ¶ 59. ↩

²⁰³ Memorial (De Jesús), ¶ 59, referring to EDF Annulment Decision, ¶ 111. ↩

²⁰⁴ Reply (De Jesús), ¶¶ 169-172. ↩

[Page 64]

Valasek and dismissed the second disqualification proposal, finding the proposal was based on unsubstantiated allegations. The Chair overlooked the clear conflict of interest resulting from the ongoing professional relationship Arbitrator Fortier had with Norton Rose.²⁰⁵ Similarly, the unchallenged arbitrators dismissed the third proposal, without considering the continued relationship with Norton Rose. Instead, they found that the proposal was not based on new facts, and it was a request for reconsideration of the second disqualification decision.²⁰⁶ The unchallenged arbitrators dismissed the fourth proposal (prompted by the revelation of a relationship of Arbitrator Fortier had with a Norton Rose counsel) finding a “limited tie” to Norton Rose. This finding, Venezuela argues, shows the unchallenged arbitrators’ failure to apply the correct standard.²⁰⁷ The unchallenged arbitrators also dismissed the fifth disqualification proposal (based on arbitrator Fortier’s benefit from the use of Norton Roses’ administrative staff even after his resignation). Venezuela submits that they imposed a higher threshold than that required by Convention Articles 57 and 14 when they found only “an indirect and purely administrative tie with Norton Rose.”²⁰⁸

258. Venezuela argues that the decisions regarding the second, third, fourth and fifth disqualification proposals against Arbitrator Fortier were unreasonable since none of them applied the correct standard, namely, whether there was an appearance of bias as a result of arbitrator Fortier’s continued relationship with Norton Rose.²⁰⁹ Instead, in the decision on the second proposal, the Chair decided whether Venezuela’s allegations were substantiated and had merit.²¹⁰ In the decision on the third proposal, the unchallenged arbitrators required Venezuela to prove actual bias (not an appearance of bias).²¹¹ In the decision on the fourth proposal, the unchallenged arbitrators required Venezuela to prove how a limited tie would lead to the conclusion of a manifest lack

²⁰⁵ Reply (De Jesús), ¶¶ 173-176. ↩

²⁰⁶ Reply (De Jesús), ¶ 178. ↩

²⁰⁷ Reply (De Jesús), ¶¶ 179, 180. ↩

²⁰⁸ Reply (De Jesús), ¶¶ 181-184, citing A/R-153 [Curtis] / A/R-174 [De Jesús], Challenge Decision - Fortier IV, ¶¶ 16 and ¶ 19(1). ↩

²⁰⁹ Reply (De Jesús), ¶¶ 187-199. ↩

²¹⁰ Reply (De Jesús), ¶¶ 188, 189. ↩

²¹¹ Reply (De Jesús), ¶ 190. ↩

[Page 65]

of impartiality.²¹² In the decision on the fifth proposal, the unchallenged arbitrators required Venezuela to prove a manifest lack of impartiality instead of an appearance of bias.²¹³

259. Venezuela argues that the unchallenged arbitrators and the Chair failed to consider the cumulative record of the proposals, thereby contravening the standard that required them to consider “all the relevant facts.”²¹⁴ Even under the EDF standard, advocated by the Conoco Parties, the decisions on the second, third, fourth and fifth disqualification proposals were unreasonable as they ignored the standard of Convention Articles 14 and 57. These decisions were also “plainly unreasonable” as since they allowed Arbitrator Fortier to refrain from disclosing facts and circumstances that created an appearance of bias to the detriment of Venezuela’s rights, ignoring the disclosure guidance of the IBA Guidelines.²¹⁵

260. Finally, in its Reply Venezuela reiterates that, despite Conoco’s assertion to the contrary, Arbitrator Fortier represented multiple times that he had severed all ties with Norton Rose. Venezuela supports this by referring to different passages of Arbitrator Fortier’s explanations. The Committee should not let his misrepresentations go unnoticed and should annul the Award for improper constitution of the Tribunal.²¹⁶

ii. Arbitrators Keith and Fortier

(a) Refusal to reconsider decisions

261. Venezuela explains that on 3 September 2013, the Tribunal, by a Majority composed of Arbitrators Keith and Fortier, issued a Decision on Jurisdiction and Merits, to which Arbitrator Abi-Saab dissented. On 8 September 2013, Venezuela asked the Tribunal to clarify certain conclusions since, according to Venezuela, the Tribunal had concluded

²¹² Reply (De Jesús), ¶ 191. ↩

²¹³ Reply (De Jesús), ¶ 192. ↩

²¹⁴ Reply (De Jesús), ¶ 193. ↩

²¹⁵ Reply (De Jesús), ¶¶ 195-198. ↩

²¹⁶ Reply (De Jesús), ¶¶ 203-207. ↩

[Page 66]

that Venezuela breached an obligation to negotiate in good faith based on Conoco’s misrepresentations and misapprehension of the evidence on record.²¹⁷

262. Venezuela submits that Arbitrators Keith and Fortier were aware that their September 2013 Decision was based on errors, yet they denied reconsidering it. For example, the effective date of the Confidentiality Agreement the Parties signed before the arbitration, prevented them from submitting evidence on the compensation negotiations undertaken. The arbitrators also failed to consider the U.S. Embassy cables, which Venezuela maintains, evidenced that the Conoco Parties had misrepresented the facts related to the compensation negotiations. According to Venezuela, when denying reconsidering their Decision, Arbitrators Keith and Fortier simply recounted the Parties’ positions and failed to analyse the facts and evidence showing that the September 2013 Decision was based on false factual premises and misrepresentations.

263. Further, Venezuela notes that Arbitrator Abi-Saab remarked that he considered Arbitrators Keith and Fortier had displayed a “general attitude vis-à-vis the Respondent”²¹⁸ and had uncritically relied on the representations made by the Claimants in the arbitration.²¹⁹

264. Venezuela submits that a reasonable observer would question the impartiality of arbitrators who decide on such a basis, and, in any event, any reasonable observer would conclude that the accumulation of circumstances tainted the integrity of the proceedings. Venezuela notes that also Arbitrator Bucher, who replaced Arbitrator Abi-Saab, later questioned the correctness of the legal determination made by Arbitrators Keith and Fortier not to reconsider the September 2013 Decision.²²⁰

²¹⁷ Memorial (De Jesús), ¶ 64. ↩

²¹⁸ A/R-82 [De Jesús] / A/R-41 [Curtis], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶¶ 16-17. ↩

²¹⁹ Memorial (De Jesús), ¶ 70. ↩

²²⁰ Memorial (De Jesús), ¶¶ 70, 72-75. ↩

[Page 67]

265. In these circumstances, Venezuela requests that the Committee annul the Award, as Arbitrators Keith and Fortier could not be relied upon to exercise independent judgment.

266. In its Reply, Venezuela argues that the Chair’s decisions on Venezuela’s first and second disqualification proposals failed to address the concerns Venezuela had raised in each of the respective proposals. Instead of addressing whether Arbitrators Fortier and Keith appeared biased, the Chair analysed whether the procedure followed by the Co-arbitrators to deny the reconsideration was reasonable or within the framework of their discretionary powers. Venezuela also reiterates that the statements of Prof. Abi-Saab and Mr. Bucher in relation to Arbitrators Keith and Fortier would make any reasonable observer doubt that Arbitrators Keith and Fortier could be relied upon to exercise independent and impact judgment.²²¹

267. Even under the EDF standard, which the Conoco Parties support, the Chair’s first decision was unreasonable. The Chair raised the threshold by requiring Venezuela to prove partiality instead of the appearance of partiality. The Chairman also failed to frame correctly the issues set forth by Venezuela, namely, Arbitrators Fortier and Keith’s treatment of Venezuela’s first request for reconsideration.²²²

(b) Withdrawal of consent to Arbitrator Abi-Saab’s resignation

268. On 25 March 2015 Venezuela proposed to disqualify Arbitrators Keith and Fortier on the basis that they could not be relied upon to exercise independent judgment. The ground for this challenge as characterized by Venezuela, was the withdrawal of their consent to Arbitrator Abi-Saab’s resignation of 20 February 2015. Arbitrator Abi-Saab resigned one day after the submission of his 19 February 2015 dissent on the September 2013 Decision in Liability and Merits.²²³

²²¹ Reply (De Jesús), ¶¶ 209-217. ↩

²²² Reply (De Jesús), ¶¶ 218-221 ↩

²²³ Memorial (De Jesús), ¶¶ 79-81. ↩

[Page 68]

269. Venezuela notes that it launched this challenged at a time when the proceeding was suspended because another challenge launched individually against Arbitrator Fortier (the 6 February 2015 disqualification proposal) was pending. On 21 February 2015, the Conoco Parties wrote to ICSID and requested that the challenge to arbitrator Fortier be submitted to the Chair of the Administrative Council.

270. On 23 February 2015, Venezuela informed that it intended to appoint a replacement arbitrator. On the same date, the Parties were invited to make observations on Arbitrator's Abi-Saab's resignation. Venezuela submits it repeatedly raised concerns to ICSID and the Chairman of the Administrative Council about whether Arbitrator Fortier who at that time was subject to a challenge could part take in matters related to Arbitrator Abi-Saab's resignation. Yet, on 4 March 2015, the Parties were informed that Arbitrators Keith and Fortier did not consent to the resignation.²²⁴

271. Venezuela submits that the 4 March 2015 letter revealed that Arbitrators Keith and Fortier had first plainly consented to the resignation and had subsequently withdrawn that consent. Venezuela's request for more information on the exchanges between Arbitrators Keith, Fortier and Abi-Saab was denied. On 25 March 2015 Arbitrator Abi-Saab expressed his surprise over the withdrawal of consent, indicating that the arbitrators were aware of his poor health and at no point had they conditioned their consent to him submitting his dissent by a certain time.²²⁵

272. In the circumstances, Venezuela submits, any reasonable observer would conclude that the Arbitrators Keith's and Fortier's withdrawal of consent was retaliation against Arbitrator Abi-Saab's dissent. Thereby, they could not be relied upon to exercise independent judgement and should have been disqualified.²²⁶

²²⁴ Memorial (De Jesús), ¶¶ 83-86. ↩
²²⁵ Memorial (De Jesús), ¶¶ 86-89. ↩
²²⁶ Memorial (De Jesús), ¶ 92. ↩

[Page 69]

273. In its Reply, Venezuela rebuts Conoco Parties' account of facts about Prof. Abi-Saab's resignation. For Venezuela, the relevant facts concern the resignation on 20 February 2015, not the timeliness of the dissenting opinion, as argued by the Conoco Parties.²²⁷

274. Venezuela adds that despite the grave infringement that the withdrawal of consent entailed, the Chairman rejected Venezuela's second disqualification proposal. According to the travaux préparatoires of the ICSID Convention, the refusal to a resignation under Article 56(3) was designed to prevent collusion between the arbitrator and the party that appointed him. However, Prof. Abi Saab resigned for health reasons, a type of resignation which has been admitted in other proceedings. Besides, Arbitrators Keith and Fortier did not find collusion between Prof. Abi Saab and Venezuela.²²⁸

275. Further, Venezuela argues that if the arbitrators sought to protect the integrity of the proceeding, then it would have sufficed with the resignation, without any need to curtail Venezuela's right to appoint. Conoco's reliance on Carnegie Minerals is misguided, because in that case Gambia was deprived of the right to appoint an arbitrator due to its failure to honor appointment deadlines in a mechanism the parties separately had agreed upon.²²⁹

276. Venezuela also questions Arbitrator Fortier's participation in the decision of whether to consent to the resignation, given that he was at that time subject to a challenge. Neither Arbitrators Fortier and Keith should have sought comments from the Parties on the resignation. The ICSID Convention does not establish such a procedure.²³⁰

277. Venezuela argues that considered as a whole, the facts would lead a reasonable observer to conclude that Arbitrators Keith and Fortier could not be relied upon to exercise

²²⁷ Reply (De Jesús), ¶¶ 223, 224. ↩
²²⁸ Reply (De Jesús), ¶¶ 228-232. ↩
²²⁹ Reply (De Jesús), ¶ 233. ↩
²³⁰ Reply (De Jesús), ¶ 235. ↩

[Page 70]

independent and impartial judgment. The Committee should as such annul the Award and all other decisions made by the Tribunal for its improper constitution.²³¹

iii. The Appointment of Arbitrator Bucher

278. Venezuela also argues that the Chair improperly appointed arbitrator Bucher when the power to appoint belonged to Venezuela, and this constitutes a ground for annulment for improper constitution under Article 52(1)(a).²³²

279. Venezuela asserts that Arbitrators Keith and Fortier were aware that their withdrawal of consent to Prof. Abi-Saab's resignation would cause a vacancy which would be filled by the Chair of the Administrative Council under Convention Article 56, thus denying Venezuela's fundamental right to appoint a replacement arbitrator.²³³

A.1(3) NO IMPROPER CONSTITUTION (CONOCO)

280. Conoco notes that Venezuela is asking the Committee to make a de novo review of every alleged fact and argument made in the arbitration, yet that is not the Committee's role. Even if the questions of arbitrator independence and impartiality are of fundamental importance, that does not change the relationship between the role of the committee and that of the body tasked with making the original decision. The Committee's role is not to determine if an arbitrator possesses the requisite qualities; the Convention and Rules already entrust that role to the unchallenged tribunal members or to the Chair of the Administrative Council.²³⁴

²³¹ Reply (De Jesús), ¶¶ 236, 237. ↩
²³² Memorial (De Jesús), ¶ 13. ↩
²³³ Memorial (De Jesús), ¶ 91. ↩
²³⁴ Counter-Memorial (Conoco), ¶ 140. ↩

[Page 71]

i. Arbitrator Fortier

(a) Arbitrator Fortier's disclosure of the merger between Norton Rose and Macleod Dixon

281. In their Counter-Memorial the Conoco Parties describe Venezuela's five proposals to disqualify arbitrator Fortier as a “prolonged tactical campaign" to delay the Award and plan its annulment application.²³⁵

282. Venezuela submitted the first challenge on 5 October 2011, while the Tribunal was working on the 2013 Decision. On 27 February 2012 Arbitrators Keith and Abi-Saab dismissed the challenge. The challenge followed Arbitrator Fortier's disclosure on 4 October 2011 that a merger between his firm Norton Rose OR LLP and Macleod Dixon LLP would become effective on 1 January 2012. He also disclosed that he had learned that Macleod Dixon's Caraca's office provided services to the ConocoPhillips Company, was acting adverse to Venezuela's interests in certain matters, and was acting on behalf of Conoco in certain ICC proceedings involving PDVSA.

283. Conoco asserts that Venezuela did not attempt to meet the applicable standard under the ICSID Convention to show why the law firm merger gave rise to a manifest lack of independence and impartiality.²³⁶ Conoco puts forward its own account of the facts²³⁷ and argued that Venezuela mischaracterized the facts related to the challenges.²³⁸

284. Conoco submits that following the standard applied in Azurix and OI European, Venezuela's application would fail on its face, because Venezuela never protested the procedures by which the disqualification proposal was resolved. Even if the standard applied in EDF, Suez II, and Mobil Exploration be followed, Venezuela still fails to show and cannot show that the arbitrators' rejection of the challenge was “so plainly

²³⁵ Counter-Memorial (Conoco), ¶ 138. ↩
²³⁶ Counter-Memorial (Conoco), ¶ 145. ↩
²³⁷ Counter-Memorial (Conoco), ¶¶ 144-153. ↩
²³⁸ Counter-Memorial (Conoco), ¶ 154. ↩

[Page 72]

unreasonable that no reasonable decision-maker could have come to such a decision.”²³⁹

285. Conoco argues that Venezuela's case for this challenge was that Arbitrator Fortier should have resigned, since he failed to disclose Norton Rose's communications with Macleod Dixon regarding the merger as soon as they occurred (no matter if he was involved in the communications or not). However, Arbitrators Keith and Abi-Saab reasonably concluded that those events could not form the basis for a disqualification. They referred to the relevant standards in Articles 14 and 57 of the ICSID Convention that Venezuela needed to meet. They also addressed the disclosure requirement under Arbitration Rule 6(2) and the IBA Guidelines. The arbitrators concluded that non-disclosure in this case did not lead to disqualification.²⁴⁰

286. Conoco asserts that Venezuela simply reargues the challenges and asks the Committee to make a new determination of Arbitrator Fortier's qualities under Convention Article 14(1). But whether Arbitrator Fortier met the requirements (which he did) is a question already decided by the unchallenged arbitrators; a decision they made based on the evidence and their factual findings.²⁴¹

287. Conoco also submits that Venezuela's argument that the decision on the challenge also constitutes a serious departure fails. It fails because Venezuela did not undertake any meaningful application of the standard of Article 52(1)(d) to the facts; and because it took the view that any annullable error under Article 52(1)(a) automatically constitutes an annullable error under Article 52(1)(d) without any support. Yet, Venezuela did not dispute that Arbitrators Keith and Abi-Saab followed the proper procedures for hearing and deciding this first challenge. Venezuela does not claim it was denied an opportunity to present its case on Arbitrator's Fortier independence and impartiality. There was no departure from a fundamental rule, let alone a serious one.²⁴²

²³⁹ Counter-Memorial (Conoco), ¶ 156, citing EDF Annulment Decision, ¶ 145. ↩
²⁴⁰ Counter-Memorial (Conoco), ¶¶ 158, 159. ↩
²⁴¹ Counter-Memorial (Conoco), ¶ 165. ↩
²⁴² Counter-Memorial (Conoco), ¶¶ 168, 169. ↩

[Page 73]

(b) Arbitrator Fortier's alleged continued ties with Norton Rose

288. Venezuela again sought to challenge Arbitrator Fortier on 6 February 2015, based on an alleged professional relationship with Norton Rose. On 1 July 2015 Chairman Kim dismissed the challenge.

289. Conoco summarizes the circumstances invoked for the challenge and submits that Venezuela fails to show that the Chair's decision on the challenge was so plainly unreasonable that no reasonable decision-maker could have come to such a decision.²⁴³

290. Conoco asserts that the Chair acted properly and reasonably when he concluded that there was no basis to disqualify Arbitrator Fortier. Conoco notes that he assessed the standards of Convention Articles 14(1) and 57; and rejected Venezuela's allegations regarding the scope of Ms. Valasek's role as “unsubstantiated.”²⁴⁴

291. Conoco asserts that the question for the Committee is not whether the Chairman's reasoning was “cavalier,” as Venezuela characterizes it, or if a third party may share Venezuela's concerns. The question is whether the Chairman's decision was plainly unreasonable.²⁴⁵

292. Further, the Chair's decision did not constitute a serious departure from a fundamental rule of procedure. Venezuela's arguments for annulment under Article 52(1)(d) are indistinguishable from those made under Article 52(1)(a). Here, Venezuela has failed to prove the existence of a fundamental rule of procedure or that the Chairman seriously departed from that fundamental rule.²⁴⁶

293. Conoco observes that on 9 November 2015, Venezuela sought for the third time to disqualify Arbitrator Fortier. On 15 December 2015, Arbitrators Keith and Bucher dismissed the proposal.

²⁴³ Counter-Memorial (Conoco), ¶ 183. ↩
²⁴⁴ Counter-Memorial (Conoco), ¶¶ 185, 186. ↩
²⁴⁵ Counter-Memorial (Conoco), ¶ 189. ↩
²⁴⁶ Counter-Memorial (Conoco), ¶ 192. ↩

[Page 75]

Accordingly, the Arbitrators rejected the challenge based on the “cumulative record.”²⁵²

298. In addition, Arbitrators Keith and Bucher did not depart from a fundamental rule of procedure. Venezuela's arguments for annulment under Article 52(1)(d) with respect to Arbitrator Fortier are indistinguishable from those it makes under Article 52(1)(a). Venezuela did not meet its burden of proving (i) the existence of a fundamental rule of procedure; and (ii) Arbitrators Keith and Bucher departed from that fundamental rule of procedure in a serious way.²⁵³

299. Then, again on 26 February 2016, Venezuela proposed to disqualify Arbitrator Fortier. On 15 March 2016 Arbitrators Keith and Bucher dismissed the challenge. This challenge was prompted by a remark made in the von Pezold v. Zimbabwe award, which noted that a Norton Rose attorney was appointed as an assistant to that tribunal in February 2012.

300. Conoco recounts the procedural background of the challenge²⁵⁴and then argues that again Venezuela failed to show that that “no reasonable decision-maker" could have come to the decision to reject this fourth disqualification proposal against Arbitrator Fortier.²⁵⁵

301. Conoco asserts that Arbitrators Keith and Bucher acted properly and reasonably when they concluded that the circumstances referenced by Venezuela did not form a basis for disqualification. Conoco notes that the Arbitrators recalled the standards of Convention Articles 14(1) and 57, and assessed whether Arbitrator Fortier had given an inaccurate account of the time that the assistant to the tribunal in the Zimbabwe case was appointed, thus creating the impression of lesser ties with Norton Rose than those that existed. But, by looking at the timeline of the assistant's appointment, which was in February 2012 with the parties' agreement, and the decision to appoint her by the

²⁵² Counter-Memorial (Conoco), ¶ 205. ↩
²⁵³ Counter-Memorial (Conoco), ¶ 208. ↩
²⁵⁴ Counter-Memorial (Conoco), ¶¶ 217-223. ↩
²⁵⁵ Counter-Memorial (Conoco), ¶ 224. ↩

[Page 76]

tribunal in December 2011, Arbitrators Keith and Bucher were satisfied with Arbitrator Fortier's explanation.²⁵⁶

302. Conoco submits that Arbitrators Keith and Bucher acted properly and reasonably, and their conclusion was not objectionable nor plainly unreasonable. Conoco notes that Venezuela did not argue any infirmities in the process by which the arbitrators rejected the challenge. Conoco notes that in the Favianca arbitration Venezuela also sought to disqualify Arbitrator Fortier on the same basis, and that the tribunal also rejected the challenge, being satisfied with Arbitrator Fortier's explanations.²⁵⁷

303. Finally, Conoco argues that Arbitrators Keith and Bucher did not depart from any fundamental rule of procedure. Venezuela's arguments for annulment under Article 52(1)(d) with respect to Arbitrator Fortier are indistinguishable from those it makes under Article 52(1)(a). Accordingly, Venezuela has not met its burden of proving (i) the existence of a fundamental rule of procedure, and (ii) that the arbitrators departed from that fundamental rule of procedure in a serious way.²⁵⁸

304. On 22 July 2026 Venezuela again sought to disqualify arbitrator Fortier. On 26 July 2016, the new Tribunal president, Arbitrator Zuleta, together with Arbitrator Bucher dismissed the challenge. According to Conoco, the challenge was based on Arbitrator Fortier's use of an administrative service firm also used by Norton Rose, which, in Venezuela's view, showed that Arbitrator Fortier had kept continued ties with that firm.²⁵⁹ Venezuela's position was that there was an affiliation between Norton Rose and the administrative service firm, and that Arbitrator Fortier should have disclosed this information earlier.²⁶⁰

305. Conoco describes the procedural background for this challenge²⁶¹ and then turns to the Arbitrators' decision on the challenge. Again, recalling the standard, Conoco submits

²⁵⁶ Counter-Memorial (Conoco), ¶¶ 227, 228. ↩
²⁵⁷ Counter-Memorial (Conoco), ¶ 231. ↩
²⁵⁸ Counter-Memorial (Conoco), ¶ 234. ↩
²⁵⁹ Counter-Memorial (Conoco), ¶ 235. ↩
²⁶⁰ Counter-Memorial (Conoco), ¶ 244. ↩
²⁶¹ Counter-Memorial (Conoco), ¶¶ 237-242. ↩

[Page 77]

that Venezuela has not shown and cannot show that “no reasonable decision-maker" could have come to the decision to reject this challenge.²⁶²

306. Conoco asserts that Arbitrators Bucher and Zuleta acted properly and reasonably in concluding that the circumstances referenced by Venezuela could not form a basis for the disqualification. They relied on the standard of Convention Articles 14(1) and 57, noting that "[t]he allegation that serves as the basis for the challenge, assuming it can be established, must be capable of being related to the present case, that is, that the particular facts must give rise to a manifest lack of independence and impartiality in this case."²⁶³

307. Conoco submits there was nothing unreasonable in that decision. The reasonableness of the decision is further confirmed by the fact that in Favianca v. Venezuela the same challenge was raised, and the arbitrators in that case also dismissed the challenge, concluding that “a reasonable third person would not entertain serious doubts about Mr. Fortier's capacity to exercise independent and impartial judgement with knowledge of these facts.”²⁶⁴

308. In addition, Arbitrators Bucher and Zuleta did not depart from any fundamental rule of procedure. Conoco submits that Venezuela's arguments for annulment under Article 52(1)(d) of Arbitrator Fortier are indistinguishable from those it makes under Article 52(1)(a). Accordingly, Venezuela has not met its burden of proving (i) the existence of a fundamental rule of procedure, and (ii) that Mr. Zuleta and Professor Bucher departed from that fundamental rule of procedure in a serious way.²⁶⁵

309. Finally, Conoco argues that Venezuela's “cumulative circumstances” argument also fails, because it is a mere attempt to engage the Committee in reviewing de novo the

²⁶² Counter-Memorial (Conoco), ¶ 243. ↩
²⁶³ Counter-Memorial (Conoco), ¶ 245, citing A/R-153 [Curtis] / A/R-174 [De Jesús], Challenge Decision - Fortier IV, ¶ 12. ↩
²⁶⁴ Counter-Memorial (Conoco), ¶ 250, citing A/CLA-83, Fábrica de Vidrios Los Andes, C.A. and Owens-Illinois de Venezuela, C.A. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/21, Decision on the Proposal to Disqualify L. Yves Fortier Q.C., Arbitrator, 12 September 2016, (“Favianca Decision on the Proposal to Disqualify L. Yves Fortier"), ¶¶ 59–60. ↩
²⁶⁵ Counter-Memorial (Conoco), ¶ 253. ↩

[Page 78]

disqualification proposals.²⁶⁶Contrary to Venezuela's suggestion that the Committee can reach its own conclusions, what the EDF, Suez II and Eiser committees have ruled is that “(i) where there was an opportunity to raise the relevant factual allegations during the underlying proceeding, they must be raised or are waived; and (ii) where a disqualification decision exists, an annulment committee “does not write on a blank sheet" but must approach a prior challenge decision with deference, overturning it if no reasonable decisionmaker could have come to the same conclusion.”²⁶⁷

310. Accordingly, because all disqualification challenges were known during the arbitration, any challenge arguments raised and resolved must be treated with deference and reviewed against the “wholly unreasonably” standard, and any arguments not raised are now waived.²⁶⁸ The Arbitrators rejected Venezuela's argument to revisit prior disqualification decisions to cumulatively consider the challenge.²⁶⁹ The sources on which Venezuela relies, only support the proposition that factors regarding an arbitrator's independence and impartiality may in isolation be an insufficient basis for disqualification, but may be relevant when considered in the context of other facts.²⁷⁰ Thus, Venezuela's attempt to relitigate its disqualification proposals on annulment fails as a matter of law and fact.

311. In its Rejoinder, Conoco notes that Venezuela brought four parallel challenges to arbitrator Fortier in Favianca, arising out of the same facts as in this case. All challenges were rejected. Conoco argues that other rational decision-makers reached the same conclusion confirming the reasonableness of the decisions by the unchallenged Tribunal members and the Chair.²⁷¹

312. Conoco argues that, in any event, regardless of whether the Committee adopts a “cumulative circumstances” standard, the outcome would be the same, as the

²⁶⁶ Counter-Memorial (Conoco), ¶ 254; Rejoinder (Conoco), ¶ 33. ↩
²⁶⁷ Counter-Memorial (Conoco), ¶ 255. ↩
²⁶⁸ Counter-Memorial (Conoco), ¶ 256. ↩
²⁶⁹ Counter-Memorial (Conoco), ¶ 259. ↩
²⁷⁰ Counter-Memorial (Conoco), ¶ 261. ↩
²⁷¹ Rejoinder (Conoco), ¶¶ 32, 33. See Favianca Decision on the Proposal to Disqualify L. Yves Fortier, ¶¶ 59–60. ↩

[Page 79]

challenges to Arbitrator Fortier, whether assessed individually or collectively are unfounded in substance.²⁷²

313. Conoco further notes that there are many factual inaccuracies in Venezuela's “cumulative circumstances” argument, such as that Arbitrator Fortier made his original disclosure only after Venezuela learned of it on the internet, Arbitrator Fortier was unable to answer questions without evasion, or that he made inaccurate disclosures.²⁷³ Contrary to Venezuela's assertion, the First challenge decision was not based on Arbitrator Fortier's resignation from Norton Rose, but rather on whether the content and timing of his October 2011 disclosure constituted grounds for disqualification, given that he had neither knowledge nor involvement in the merger.²⁷⁴

ii. Arbitrators Keith and Fortier

(a) The Reconsideration Decision

314. On 11 March 2014 Venezuela sought to disqualify arbitrator Keith and Fortier. On 5 May 2014, the Chair rejected the disqualification proposal. Conoco submits that this challenge was in response to the Arbitrators' decision of 10 March 2014 not to reconsider the Tribunal's 2013 Decision (the “Reconsideration Decision”), which held Venezuela in breach of Article 6(c) of the BIT by failing to negotiate in good faith with respect of the compensation payable for its expropriation of Claimants' investments.²⁷⁵

315. Conoco argues that the Chair acted properly and reasonably when he concluded that the circumstances referenced by Venezuela could not form the basis for disqualification. The Chair's decision underscores the standard of Convention Articles

²⁷² Rejoinder (Conoco), ¶ 39, ↩
²⁷³ Rejoinder (Conoco), ¶ 39 ↩
²⁷⁴ Rejoinder (Conoco), ¶ 40. ↩
²⁷⁵ Counter-Memorial (Conoco), ¶¶ 264-270. ↩

[Page 80]

14(1) and 57, noting that the subjective belief of a party is not enough to satisfy the requirements under the Convention.²⁷⁶

316. Conoco asserts that, after reviewing Venezuela's arguments, the Chairman found that the basis for the challenge was that Venezuela was dissatisfied with the majority's Reconsideration Decision and with the procedure leading to it, including the Tribunal's decision not to convene an oral hearing. The Chair then found that the Tribunal had adopted a reasonable procedure within its discretion and that there was nothing in the reasoning or conclusion of the Reconsideration Decision suggesting an absence of impartiality. On that basis the Chair considered that a third party reasonably evaluating the facts would not conclude that there was a manifest lack of the qualities of Convention Articles 14(1) and 57.²⁷⁷

317. Conoco also submits that there is a tension between the arguments of Venezuela as represented by Curtis and as represented by De Jesús. Venezuela (Curtis) argues that the disqualification proposal was unrelated to the procedure adopted by the Tribunal; and criticizes that the Chair treated the proposal as a routine procedural issue failing to address its merits. This is despite the fact the Chair considered the reasoning and conclusions of the Reconsideration Decision and found nothing suggesting any absence of impartiality. In contrast, Venezuela (De Jesús) requests the Committee to review de novo the procedure adopted by the Tribunal, while Venezuela (Curtis) acknowledges that the Chair already examined that process and found no basis to uphold the disqualification.²⁷⁸

318. Contrary to Venezuela's contention, the Chair reviewed Venezuela's allegations in detail about Arbitrator Abi-Saab's dissent, and even quoted passages from Venezuela's pleading that incorporated his dissent. In any event, the Chair did not have an obligation to explicitly address each of Venezuela's contentions or to quote the dissent. Venezuela was heard, as it admits, and the Chair, having considered Venezuela's arguments,

²⁷⁶ Counter-Memorial (Conoco), ¶ 278. ↩
²⁷⁷ Counter-Memorial (Conoco), ¶ 279. ↩
²⁷⁸ Counter-Memorial (Conoco), ¶¶ 280-281. ↩

[Page 81]

reached a conclusion that satisfies the relevant standard: a decision that is not so plainly unreasonable that no reasonable decision-maker could have come to.²⁷⁹

319. In addition, the Chair did not depart from a fundamental rule of procedure. The mechanism for ensuring the independence and impartiality of the tribunal is the arbitrator challenge mechanism, regulated by Convention Articles 57 and 58 and Arbitration Rule 9. Venezuela undertakes no meaningful application of the standard for annulment under Article 52(1)(d) to the facts relating to this challenge to Arbitrators Keith and Fortier; it merely, without support, argues that any annullable error under Article 52(1)(a) ipso facto constitutes an annullable error under Article 52(1)(d). Venezuela does not deny that the Chair followed the proper procedures for hearing and deciding on this challenge and it was offered an opportunity to present its case. The annulment should be rejected as Venezuela failed to prove (i) the existence of a fundamental rule of procedure, and (ii) that the Chair departed from that fundamental rule of procedure in any serious way.²⁸⁰

320. In its Rejoinder Conoco maintains that Venezuela's (Curtis) Reply did not make any new arguments about the Chair's dismissal of the First challenge to the Tribunal majority. Conoco also rebuts Venezuela's (De Jesús) allegation that the Chairman raised the standard in its decision, requiring that Venezuela prove partiality instead of the appearance of partiality. The Chair applied the standard of Articles 14 and 57, finding that "there is nothing in the reasoning or conclusions of the Decision on Reconsideration that suggests an absence of impartiality."²⁸¹ Conoco also submits, contrary to Venezuela's contention, that the Chair considered Venezuela's alleged "facts," including Venezuela's allegations regarding the Tribunal's First reconsideration decision, and concluded that those “facts” would not lead an objective third party to find a lack of impartiality, manifestly or otherwise.²⁸²

²⁷⁹ Counter-Memorial (Conoco), ¶¶ 282, 283. ↩
²⁸⁰ Counter-Memorial (Conoco), ¶¶ 284, 285. ↩
²⁸¹ Rejoinder (Conoco), ¶ 42. ↩
²⁸² Rejoinder (Conoco), ¶ 44. ↩

[Page 82]

321. In ruling on the First challenge to the Tribunal majority, the Chair did consider Venezuela's allegation based on Prof. Abi-Saab's dissent referring to the arbitrator's "general attitude vis-à-vis the Respondent.” In the decision on the Second challenge to the Tribunal majority, the Chair remarked that Prof. Abi-Saab's dissent only revealed a profound disagreement on points of law and evidence, but it was not proof of the arbitrators having a general negative attitude towards Venezuela. Venezuela has failed to explain how those conclusions were so plainly unreasonable that no decision-maker could reach them.²⁸³

(b) No consent to Arbitrator Abi-Saab's resignation

322. On 25 March 2015 Venezuela again sought to challenge Arbitrators Keith and Fortier. On 1 July 2015, the Chair of the Administrative Council issued a decision dismissing this challenge (and the second individual challenge to Arbitrator Fortier). Venezuela's challenge was based on an alleged general negative attitude of Arbitrators Keith and Fortier toward Venezuela, supposedly shown by their decision not to consent to Arbitrator Abi-Saab's resignation while the second challenge to Arbitrator Fortier's challenge was still pending.

323. Conoco argues, among others, that the Chair acted properly and reasonably when it concluded that the circumstances referenced by Venezuela could not form a basis for disqualification. Conoco submits that the Chairman assessed the challenge under the appropriate standard, which Venezuela does not contest. The Chair continued to examine the substance of Venezuela's proposal. The Chair determined that "[a] third party undertaking a reasonable evaluation of the facts in this case would not conclude that Judge Keith and Mr. Fortier lack the qualities required by Article 14(1) of the ICSID Convention.”²⁸⁴

324. In its Rejoinder, the Conoco Parties emphasize that Prof Abi-Saab resigned at the most disruptive moment possible, after withholding his dissenting opinion for well over a

²⁸³ Rejoinder (Conoco), ¶ 45. ↩
²⁸⁴ Counter-Memorial (Conoco), ¶ 328, citing A/R-141 [Curtis] / A/R-175 [De Jesús], Decision on the Proposal to Disqualify a Majority of the Tribunal, 1 July 2015, (“Challenge Decision – Majority II"), ¶ 97. ↩

[Page 83]

year. Conoco accounts the facts surrounding the resignation noting Prof Abi-Saab's participation in a conference four days after his resignation, where he made remarks indicative of disruptive conduct in relation to ICSID proceedings.²⁸⁵

325. Conoco also rejects Venezuela's position that Arbitrators Keith and Fortier “withdrew” their consent. They declined to consent to the resignation in the exercise of their discretion. They issued reasoned decision based on the resignation's disruptive timing and the unprecedented situation that ensued from the resignation. Consent could not have been “withdrawn,” since the resignation Prof. Abi-Saab proposed months earlier never took place, and the actual resignation occurred under different circumstances to which the arbitrators never consented.²⁸⁶

326. Conoco adds that Venezuela's second challenge to Arbitrators Fortier and Keith was based on improper communications between Venezuela and Prof. Abi-Saab after his resignation, impropriety which Venezuela does not contest. The Committee should disregard Prof. Abi-Saab's email of 25 March, a communication which had no legal status in the arbitration. In any event, the arguments that Venezuela derives from that email are no basis for annulment.²⁸⁷The Conoco Parties also stress that Venezuela's position is difficult to reconcile: it acknowledges the “procedural morass" the resignation created during the pendency of the challenge while it claims a serious departure from a fundamental rule of procedure when Arbitrators Fortier and Keith decided not to consent to the resignation.²⁸⁸

327. Conoco reiterates that Venezuela failed to show that the Chairman's decision rejecting the Second challenge to the Tribunal majority did not follow the appropriate procedures (Azurix and OI European standards) or that it was plainly unreasonable (EDF, Suez II, Mobil Exploration). The Chairman determined that a third party making a reasonable evaluation of the facts (including the language in Prof. Abi-Saab's dissents) would not

²⁸⁵ Rejoinder (Conoco), ¶¶ 51, 52. ↩
²⁸⁶ Rejoinder (Conoco), ¶ 53. ↩
²⁸⁷ Rejoinder (Conoco), ¶ 54. ↩
²⁸⁸ Rejoinder (Conoco), ¶ 57. ↩

[Page 84]

conclude that the arbitrators lacked the qualities required by Convention Article 14(1).²⁸⁹

iii. The Appointment of Arbitrator Bucher

328. Conoco argues that Venezuela has failed to show that the Tribunal was improperly constituted because of the Chairman's appointment of arbitrator Bucher. Conoco submits that the Committee's inquiry into the arbitrator appointments by ICSID is analogous to a review of prior decisions on arbitrator challenges, i.e., if there was a failure to comply with Parties' arbitration agreement, which is governed by Convention Articles 37-40, 56-58 and Arbitration Rules 1-12.²⁹⁰

329. Conoco refers to the decision of the ad hoc committee in Carnegie Minerals v. Gambia to support its argument that the right to appoint a replacement arbitrator is conditional. In that case, ICSID appointed an arbitrator on the respondent's behalf after the respondent failed to appoint within the time required under the parties' arbitration agreement. The committee rejected the state's annulment application and held that the right to appoint an arbitrator can be described as fundamental, but it is not unconditional, and a party may waive or be deprived of the right under the terms of the parties' agreement. The committee found that under the applicable rules the state had lost its right to appoint, and the Secretary-General had properly appointed in substitution.²⁹¹

330. Conoco argues that just as Gambia's right was conditional under the terms of the arbitration clause, Venezuela's right to appoint an arbitrator was conditional under the terms of the ICSID Convention and the Arbitration Rules. In this case, since the Tribunal did not consent to the resignation under Article 56(3) and Rule 8(2),

²⁸⁹ Rejoinder (Conoco), ¶¶ 59, 60. ↩
²⁹⁰ Counter-Memorial (Conoco), ¶ 331. ↩
²⁹¹ Counter-Memorial (Conoco), ¶ 332, citing A/CLA-101, Carnegie Minerals (Gambia) Limited v. Republic of The Gambia, ICSID Case No. ARB/09/19, Decision on Annulment, 7 July 2020, (“Carnegie Annulment Decision"), ¶¶ 126, 146. ↩

[Page 85]

Venezuela lost its conditional right to appoint under the rules to which it agreed, and the Chair appointed to fill the vacancy under Rule 11(2.²⁹²

331. Conoco argues that Venezuela's argument that a party may only be deprived of its right to appoint a replacement arbitrator in cases of improper conduct or collusion by the appointing party fails, because (i) Convention Article 56 and the Arbitration Rules do not define or limit the factors a tribunal may consider in deciding whether to consent to a resignation; (ii) there was no indication of collusion with or improper conduct by the appointing party when a party-appointed arbitrator's resignation was not accepted, and it is legitimate for a tribunal to consider procedural disruptions when deciding whether to consent; (iii) the commentaries Venezuela cites do not change the analysis and the language of Article 56(3) is unambiguous; (iv) the improper communications between Prof. Abi-Saab and Venezuela constitute improper conduct Prof. Abi-Saab's activities following his resignation are difficult to reconcile with his narrative.²⁹³

332. Conoco argues that the criteria Venezuela intends to graft onto Article 56(3) (improper conduct or collusion) do not exist and cannot as a matter of treaty interpretation be implied into the ICSID Convention. However, if the criteria exist, there is ample suggestion of improper conduct.²⁹⁴

333. In its Rejoinder, Conoco argues that Venezuela is requesting the Committee to make a de novo review of the Tribunal's decision not to consent to the resignation, which then led to the appointment of a replacement arbitrator. Conoco recalls that such a decision is at the Tribunal's discretion and Article 56(3) and Rule 8(2) do not delimit factors that a truncated tribunal may consider in deciding whether to consent to a resignation.²⁹⁵

²⁹² Counter-Memorial (Conoco), ¶ 333. ↩
²⁹³ Counter-Memorial (Conoco), ¶ 340, citing A/CLA-78, G. Abi-Saab, “The Third World intellectual in praxis: confrontation, participation, or operation behind enemy lines?,” 37 Third World Quarterly (2016), No. 11, 1957–71, pp. 1962-64, 1967–69. ↩
²⁹⁴ Counter-Memorial (Conoco), ¶ 341. ↩
²⁹⁵ Rejoinder (Conoco), ¶¶ 67, 68. ↩

[Page 86]

334. Conoco also rebuts Venezuela's contention that Conoco's position regarding Article 56(3) is untenable. First, the plain text of Article 56(3) and Rule 8(2) do not define or limit the grounds a tribunal may consider, nor do they require to provide reasons. Second, Venezuela did not justify the standard it posits for the Tribunal's reasons or the review under Article 52. Third, no committee has ever reviewed the Tribunal's decision under Article 56(3) and the Committee need not do so here, since the Chairman already reviewed the Tribunal's exercise of discretion in connection with the decision on the Second challenge to the Tribunal majority. Fourth, if the Committee decided to review the Tribunal's decision under Article 56(3), the Committee should take guidance from the "plainly unreasonable” standard applied to the review of decisions on arbitrator challenges.²⁹⁶

335. Conoco also defends its reliance on Carnegie Minerals. The Claimants never suggested that the facts of that case were the same as this one, but the case elucidates the legal principle that any right to appoint an arbitrator is conditional and can be lost under the terms of the parties' arbitration agreement. Just like Gambia's right was conditional under the terms of the arbitration agreement, here Venezuela's rights were conditional under the terms of the ICSID Convention and Arbitration Rules.²⁹⁷

²⁹⁶ Rejoinder (Conoco), ¶¶ 69-74. ↩
²⁹⁷ Rejoinder (Conoco), ¶¶ 78 79. ↩

[Page 87]

A.1(4) THE COMMITTEE'S ANALYSIS OF THE ALLEGED IMPROPER CONSTITUTION

336. Having analysed the standard for annulment on the ground of improper constitution of the tribunal (Section VI. Part 2(a)), the Committee now moves to examine whether an Award rendered by an Arbitral Tribunal composed of Mr Fortier, Judge Keith²⁹⁸ and Professor Bucher withstands the Applicant's criticisms concerning improper constitution (A.1(4)).

337. The Committee will first analyse the arguments presented by the challenging Party, Venezuela, as represented by Curtis (A.1(4)(1)), then and as represented by De Jesús (A.1(4)(2)). As with all other challenges, the Committee devotes no specific section on Conoco's arguments which have been already summarized above under the Parties' positions. Not being the challenging Party, Conoco's arguments in defence are only dealt with as the Committee analyses the grounds advanced by Curtis and De Jesús in support of Venezuela's challenge whenever this is useful for the Committee's demonstration.

A.1(4)(1) THE COMMITTEE'S ANALYSIS OF THE ALLEGED IMPROPER CONSTITUTION OF THE TRIBUNAL AS ARGUED BY VENEZUELA (CURTIS)

i. Arbitrator Fortier (Independence and impartiality)

338. The improper constitution of the Arbitral Tribunal because of Mr Fortier essentially rests on a five-prong criticism concerning his association with the law firm of Norton Rose of which he was a partner. A conflict of interest issue arose when a merger occurred during the arbitration proceedings with the firm of Macleod Dixon which advised adverse interests to those of Venezuela.²⁹⁹ Macleod Dixon notably represented Conoco, together with Freshfields, also Conoco's co-counsel in ARB/07/30, in a case

²⁹⁸ Judge Keith was president of the Arbitral Tribunal from its initial constitution on 23 July 2008 until his resignation on 21 March 2016 (A/R-76). ↩
²⁹⁹ Memorial (Curtis), ¶¶ 106, 107. ↩

[Page 88]

against the state company Petróleos de Venzuela (PDVSA) involving the Hamaca and Petrozuata Association Agreements also on issue in this arbitration.³⁰⁰

339. Mr Fortier clarified in his letter of 18 October 2011, to Judge Keith and Professor Abi-Saab about his resignation from Norton Rose with effect on 31 December 2011:

“It should be of interest to you and to the parties to know that I have not been involved in any way in the negotiation which lead to the announcement of the Firm's forthcoming merger with Macleod Dixon. In addition, in reply to point (vi) of the Respondent's letter to you of 13 October 2011,³⁰¹ I have not taken part in or been privy to the plans (if any) ‘for the coordination of the international arbitration group and the business plan for promoting the combined firm's expertise in this area. ’”³⁰²

340. Mr Fortier reaffirmed to the two other members of the Arbitral Tribunal on 17 November 2011, that he has “no knowledge of any file (if indeed any exists) ‘on which lawyers from Norton Rose and Macleod Dixon have already been working together.' I can categorically state that I have had no involvement whatsoever in any such file, nor have I been made privy to any information about any such file”.³⁰³

341. The Committee cannot accept the first prong of the Applicant's criticism³⁰⁴ that Mr Fortier must have been involved in the merger discussions between the two firms which according to the press, dated back almost a year before Mr Fortier's disclosure to the Secretary-General of ICSID on 4 October 2011.³⁰⁵ Macleod Dixon's presence in South America and Norton's Rose experience in arbitration with Mr Fortier's stature may provide explanations for the merger but not of Mr Fortier's involvement.³⁰⁶

³⁰⁰ Memorial (Curtis), ¶ 9. ↩
³⁰¹ A/R-122 [Curtis], Letter with Appendices from Respondent to Judge Keith and Professor Abi-Saab, 13 October 2011. ↩
³⁰² A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs. ↩
³⁰³ A/R-139 [Curtis] / A/R-148 [De Jesús], Letter from Mr. Fortier to Judge Keith and Professor Abi-Saab, 17 November 2011 (“Fortier November letter to co-arbs”). ↩
³⁰⁴ Memorial (Curtis), ¶ 14; A/R-52 [Curtis] / A/R-93 [De Jesús], Fortier email to ICSID SG. ↩
³⁰⁵ A/R-52 [Curtis] / A/R-93 [De Jesús], Fortier email to ICSID SG. ↩
³⁰⁶ Reply (Curtis), ¶ 91. Tr. Day 1, p. 153: 22-24. ↩

[Page 89]

342. Making a disclosure is not in any way an admission of an inability to serve. Quite to the contrary, the arbitrator feels capable to sit with independence and impartiality as the purpose of the disclosure is precisely to allow the parties to judge whether they agree with the evaluation of the arbitrator and to explore the situation further. It was not reprehensible for Mr Fortier to resign from Norton Rose, as he informed on 17 October 2011, after Venezuela challenged him on 5 October 2021, in reaction to the disclosure on 4 October 2011.³⁰⁷

343. In addition, Mr Fortier declared his relation to Norton Rose after his resignation in the same letter of 18 October 2011:

“There are members of Norton Rose OR who have assisted me in certain files in which I serve as an arbitrator - e.g. by acting as Administrative Secretary to the Tribunal -whom I may continue to call upon for assistance after 1 January 2012. In such event, I will make arrangements with Norton Rose Canada in order for the time of these individuals to be billed to me by Norton Rose Canada. The only person who has assisted me in the present file is Ms. Rachel Bendayan, a junior associate of the Firm's Litigation Group based in Montreal, and she has already signed the undertakings establishing the ethical wall in place since 5 October 2011. Ms. Bendayan has not done any work in this matter since August 2011 and I will not call upon her or any one else from Norton Rose OR/Norton Rose Canada to assist me in this matter in the future.”³⁰⁸

Because Mr Fortier, Venezuela says, committed repeated non-disclosures in this regard, which were incomplete, misleading, or inaccurate,³⁰⁹ it was forced to request clarifications from him about the extent of his relationship with Norton Rose after it discovered evidence of this continued relation.³¹⁰

344. An arbitrator's failure to disclose certain facts and circumstances does not necessarily mean that a conflict of interest exists. Venezuela proposes the standard of an appearance

³⁰⁷ Tr. Day 1, p. 154: 5-12. A/R-51; A/R-52 [Curtis] / A/R-93 [De Jesús], Fortier email to ICSID SG; A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs. ↩
³⁰⁸ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs. ↩
³⁰⁹ Memorial (Curtis), ¶¶ 44, 102, 106. Tr. Day 3, p. 17:13-19. ↩
³¹⁰ Memorial (Curtis), ¶¶ 30, 37, 41, 59. ↩

[Page 90]

of dependence or bias which is commonly used by ad hoc committees.³¹¹ The disqualification test is not whether bias has affected the decision (actual bias) but whether there exists facts and circumstances that give rise to a reasonable suspicion or apprehension of bias in the fair-minded observer. The test is thus an objective one³¹² as the fair-minded and informed observer does not have an interest in the outcome of the arbitration other than the interest of advancing natural justice and due process.

345. The next three prongs of the Applicant's criticism bear on Mr Fortier's disclosure obligations regarding the lawyers at Norton Rose who served as secretary to arbitral tribunals in the Yukos cases against Russia which were chaired by Mr Fortier, or, like Ms Bendayan, assisted him as chair of other ICSID tribunals. The fifth prong of Venezuela's attack is that Mr Fortier had besides billing arrangements with Services OR LP/SEC (“Services OR”) a wholly owned subsidiary of Norton Rose, for secretarial and other support services.³¹³

346. The Committee notes that the involvement of Norton Rose lawyers fell within the scope of the information provided by Mr Fortier on 18 October 2011 about continued assistance after his resignation of Norton Rose members to arbitral tribunals with the exception of the underlying arbitration. Ms Bendayan thus served from 18 October 2011 to 10 October 2014 as assistant to Mr Fortier in the Agility ICSID case³¹⁴ and Ms Fitzgerald, another Norton Rose lawyer, as assistant to two Zimbabwe ICSID cases.³¹⁵ Ms Fitzgerald's appointment, as pointed out by Venezuela, took effect on February 2012, however, her appointment was agreed before Mr Fortier's resignation on 31 December 2011.³¹⁶ With that precision, the conditions of Ms Fitzgerald's appointment

³¹¹ Memorial (Curtis), ¶¶ 93-96. Eiser Annulment Decision, ¶ 206; EDF Annulment Decision, ¶ 109; Suez Annulment Decision, ¶ 78. ↩
³¹² Suez Annulment Decision, ¶ 78; EDF Annulment Decision, ¶¶ 109-111; A/RLA-47 [Curtis] / A/RLA-82 [De Jesús], Caratube International Oil Company LLP & Mr. Devincci Salah Hourani v. Republic of Kazakhstan, ICSID Case No. ARB/13/13, Decision on the Proposal for Disqualification of Mr. Bruno Boesch, 20 March 2014, (“Caratube Disqualification Decision"), ¶¶ 54, 57: “an objective standard based on a reasonable evaluation of the evidence by a third party' or, in other words, on the 'point of view of a reasonable and informed third person"". ↩
³¹³ Memorial (Curtis), ¶¶ 26-44, 57-66, 71-83. ↩
³¹⁴ Memorial (Curtis), ¶¶ 42-43. Tr. Day 1, p. 157: 14-25. ↩
³¹⁵ Memorial (Curtis), ¶¶ 39-41, 71-75. Tr. Day 1, p. 156: 22-25, p. 157: 1-13. ↩
³¹⁶ A/R-129 [Curtis] / A/R-176 [De Jesús], Mr. Yves Fortier's Explanations, 16 April 2015. ↩

[Page 91]

do not reveal an intrusion of Macleod Dixon in the proper discharge by Mr Fortier of his arbitrator's duties in the underlying arbitration. The same conclusion can be drawn for Ms Bendayan's appointment on the day when Mr Fortier informs of the assistance by Norton Rose's lawyers after his resignation. The Committee further concludes the same regarding Mr Valasek's role as secretary of the Yukos tribunals. The Applicant puts forward Russia's contentions in its efforts to resist the enforcement of the Yukos awards in 2015 which raised Mr Valasek's participation, far in excess of administrative tasks, as a "fourth arbitrator" in light of the remuneration received and of alleged authorship of the Yukos awards.³¹⁷ That is however if “the expert report regarding the authorship of the Yukos awards were correct.”³¹⁸ Relationships between an arbitrator and another arbitrator who are lawyers in the same firm may be considered as presumably subject to disclosure in the arbitration in which they sit. This would not assume that Mr Fortier bore the identity of the combined firm of Norton Rose-Macleod Dixon, which would need to be demonstrated. Even if Mr Valasek effectively performed an arbitrator's role in Yukos, there would still be a missing link as to how the situation in the Yukos tribunals affected Mr Fortier's independence and impartiality in the underlying arbitration.³¹⁹

347. The Committee now turns to the billing arrangements for Mr Fortier's secretarial staff who wished to continue participating in the insurance and other benefits offered by Services OR.³²⁰ Venezuela's request for information on 24 October 2011 about the existence of “any office sharing arrangements, arrangements for the provision of secretarial or other support services, or consulting or billing arrangements between Mr Fortier and the combined firm”³²¹ was first answered by Mr Fortier on 17 November 2011 that he was looking for rental premises.³²² The Applicant lays great

³¹⁷ Memorial (Curtis), ¶¶ 26-35, 57-66. Tr. Day 1, p. 155: 4-19, p. 156: 1-21. ↩
³¹⁸ Memorial (Curtis), ¶ 61. ↩
³¹⁹ A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 95. ↩
³²⁰ Reply (Curtis), ¶ 95. Tr. Day 1, p. 158: 18-25, p. 159: 1-25, p. 160: 1-2. ↩
³²¹ A/R-121 [Curtis], Letter with Appendices from Respondent to Judge Keith and Professor Abi-Saab, 24 October 2011. ↩
³²² A/R-139 [Curtis] / A/R-148 [De Jesús], Fortier November letter to co-arbs. ↩

[Page 92]

emphasis on the late disclosure in 2016³²³ of the arrangement with Services OR, which provided Mr Fortier “with the substantial benefits of allowing him to retain and hire new staff while relieving him of the burden and substantial additional cost involved in setting up an equivalent benefits plan.”³²⁴ The contention fails to demonstrate how the practicalities of Mr Fortier's arrangement with Services OR as compared to a similar arrangement with another company for secretarial support would have affected his independence and impartiality. The Applicant puts forward the episode of a staff member who described herself on the social media as an employee of Norton Rose.³²⁵ The billing arrangements between Mr Fortier's arbitrator practice and Services OR dispel any doubt that this was wholly erroneous. Mr Fortier had no financial interest in the activities of the combined Norton Rose-Macleod Dixon firm and the financial arrangements with Services OR do not disclose that Mr Fortier bore the identity of the combined firm. There is no causal nexus because we cannot find, as the Applicant claims, that the payment arrangements “could only be possible through an affiliation between Norton Rose and Cabinet Yves Fortier.”³²⁶ Having knowledge of Mr Fortier's desire to avoid the least possible disruption in his activities after 31 December 2011 by enabling the staff of his arbitrator's practice to continue benefitting from the same advantages offered by Services OR,³²⁷ the informed observer would not have regarded against the backdrop of Mr Fortier's resignation from Norton Rose the completion of his disclosure on services arrangements in 2016 as an indication of Mr Fortier's inclination towards interests adverse to those of Venezuela in the underlying arbitration.

348. Mr Fortier's letter of 18 October 2011, also clarified that he will cease receiving any remuneration from Norton Rose as of 31 December 2011, including any retirement benefit.³²⁸ In the circumstances of Mr Fortier's relations with Norton Rose, a fair-

³²³ Reply (Curtis), ¶¶ 106-108, 127. ↩
³²⁴ Memorial (Curtis), ¶ 83. ↩
³²⁵ Memorial (Curtis), ¶¶ 80-82. Tr. Day 1, p. 159:6-12. ↩
³²⁶ Memorial (Curtis), ¶ 82. ↩
³²⁷ A/R-151 [Curtis] / A/R-151 [De Jesús], Letter of Mr Fortier to the ICSID Secretariat of 22 July 2016. ↩
³²⁸ "As of that date [31 December 2011], I will no longer be a member of the Firm and will thus cease to earn any remuneration from Norton Rose OR. For your additional information, I have no entitlement to any retirement benefit from the Firm.” (A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs). ↩

[Page 93]

minded observer would conclude, without undue complacence nor suspicion, that the existence of a conflict of interest has not been shown out of Mr Fortier's performance of his disclosure obligations.

349. Could the circumstances surrounding Mr Fortier's situation amount to a real possibility of a lack of impartiality, if compounded with the “physical proximity”³²⁹ of Mr Fortier's professional abode in Montreal on the same floor as the reception area of Norton Rose³³⁰ and with the emotional attitude attributed to Mr Fortier when he resigned?³³¹ The emotional ties are not however with Norton Rose but with Ogilvy Renault, the firm he stayed with for fifty years until it merged with Norton Rose in 2010.³³² This is confirmed by a Canadian magazine article: “Fortier retains many good memories from his 50-year career with Ogilvy Renault where he was once chairman. There's still a strong sense of camaraderie with his former colleagues [...] who first knew him as their mentor. They now know him as their friend."³³³ A fair-minded observer would not find that the situation creates a commonality of interest between Mr Fortier and his former colleagues on the same floor, other perhaps than in tenant-landlord discussions since they all leased from a client of Norton Rose, such as to influence him negatively towards Venezuela. Nor would a fair-minded observer find that Mr Fortier's memories from Ogilvy Renault would have instilled in his mind an antagonistic approach to Venezuela's interests in the underlying arbitration because of Macleod Dixon's representation of adverse interests to those of the Applicant.

350. Do the above circumstances display a negative attitude towards Venezuela on the part of Mr Fortier in the Award? The Conoco Parties suggest an answer: “Zero plus zero remains zero.”³³⁴ Venezuela argues that Mr Fortier should have been disqualified on the basis of the accumulation of these circumstances.³³⁵ A fair-minded observer who

³²⁹ Memorial (Curtis), ¶ 46. ↩
³³⁰ Memorial (Curtis), ¶ 45. ↩
³³¹ Memorial (Curtis), ¶ 16. ↩
³³² A/R-139 [Curtis] / A/R-148 [De Jesús], Fortier November letter to co-arbs. ↩
³³³ Memorial (Curtis), ¶ 45. ↩
³³⁴ Rejoinder (Conoco), ¶ 35. ↩
³³⁵ Memorial (Curtis), ¶ 108, Reply (Curtis), ¶ 101. ↩

[Page 94]

undertakes a holistic analysis of Mr Fortier's resignation from Norton Rose would not conclude in answering the Applicant's interrogation on the proper constitution of the Arbitral Tribunal, that it gives rise to justifiable doubts regarding Mr Fortier's ability to make the Award as an independent and impartial arbitrator because Mr Fortier's interests were aligned with those of the combined Norton Rose-Macleod Dixon firm against the interests of Venezuela.

351. Conoco highlights the reasoned and plainly reasonable character of the decision of Mr. Fortier's colleagues to reject his first challenge on 27 February 2012 in light of the forthcoming merger and the extent of Macleod Dixon's involvement in multiple matters adverse to Venezuela³³⁶ and of the Chairman's decision which rejected on 1 July 2015 Venezuela's second Proposal to disqualify Mr Fortier because of his professional and emotional ties with Norton Rose after his resignation in 2011.³³⁷ Conoco adds that Venezuela has also not shown that Judge Keith and Prof. Bucher reached a plainly unreasonable result in their rejection on 15 December 2015 of Mr. Fortier's third challenge by Venezuela by reason of Mr. Valasek's activity in the Yukos case³³⁸ and of the fifth challenge on 15 March 2016 regarding his assistance in the Zimbabwe cases,³³⁹ nor that Mr. Zuleta and Prof. Bucher reached a plainly unreasonable result when they rejected on 26 July 2016 Mr. Fortier's fifth disqualification proposal filed by Venezuela concerning the arrangement with Services OR.³⁴⁰

³³⁶ A/R-119 [Curtis] / A/R-146 [De Jesús], Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., Arbitrator, 27 February 2012. Counter-Memorial (Conoco), ¶¶ 156-166. ↩
³³⁷ Counter-Memorial (Conoco), ¶ 189. ↩
³³⁸ A/R-148 [Curtis] / A/RLA-49 [De Jesús], Challenge Decision - Fortier II. Judge Keith and Prof. Bucher reasonably found that Mr Fortier had fully answered Venezuela's interrogatory, and that “[t]he allegation, assuming it can be established, must be capable of being related to the present case that is, that the particular collaboration with Mr. Valasek gives rise to a manifest lack of independence and impartiality in this case" ¶¶ 40. Counter-Memorial (Conoco), ¶¶ 201-212. ↩
³³⁹ A/R-150 [Curtis] / A/RLA-50 [De Jesús], Decision on the Proposal to Disqualify L. Yves Fortier, Q.C., 15 March 2016, Counter-Memorial (Conoco), ¶¶ 224-233. ↩
³⁴⁰ A/R-153 [Curtis] / A/R-174 [De Jesús], Challenge Decision - Fortier IV. Mr Zuleta and Prof. Bucher considered the facts related to the administrative arrangement raised by Venezuela, and concluded that, even assuming the arrangement benefited Mr Fortier, Venezuela had failed to show why and in what respect such benefit would influence Mr Fortier's activity as arbitrator in the case. Further, Mr Zuleta and Prof. Bucher noted that they could not "see how the facts relating to those services [...] would lead a reasonable third person with knowledge of those facts to the conclusion that Mr. Fortier is manifestly lacking in the ability to act impartially between the parties in the present arbitration." ¶¶ 15, 16. Counter-Memorial (Conoco), ¶¶ 243-250. ↩

[Page 95]

352. The Applicant provides no demonstration as to how the criticisms raised with regard to Mr Fortier's continued links with Norton Rose after his resignation evidence, even if considered in the aggregate, create a conflict of interest with Venezuela that would raise justifiable doubts as to his independence and impartiality which could have tainted the proceedings and materially affected the Award.

ii. Arbitrators Keith and Fortier (Independence and Impartiality)

353. The Committee therefore proceeds further with Mr Fortier's conduct in the underlying arbitration, this time because of his deeds with Judge Keith.

(a) Refusal to reconsider the 2013 Decision on Jurisdiction and Liability

354. There is at first Mr Fortier's refusal, together with Judge Keith, to reconsider their majority Decision on Jurisdiction and the Merits of 3 September 2013. Venezuela states that its attack is not disagreement on legal and factual issues but calls for a reasonable evaluation by a third-party observer of the evidence from which the conclusion of an appearance of lack of impartiality can only be drawn.³⁴¹ Venezuela is guided in its criticism by the declarations of Prof. Abi-Saab, the dissenting arbitrator who observed the attitude of his fellow arbitrators.³⁴² We take the dissenting arbitrator's most salient remarks underlined by Venezuela in its submission³⁴³:

“the Majority Decision predicated, not on the basis of positive proof, but by divination or sheer fiat, a presumption – drawn from a single misconceived instance involving an error of fact – of a constant pattern of conduct attributable to the Respondent, of not hesitating to violate its obligations whenever it suited its purposes [...] relying almost exclusively and uncritically on the affirmations and uncritically on the affirmations and representations of the Claimants throughout the proceedings [... ] But in order for this version to prevail, the Majority Decision had to neutralize any contradictory evidence [...] as well as c) denying any legal significance and effect to ‘whatever confidentiality agreement there was' [...]
In these circumstances, I don't think that any self-respecting Tribunal that takes seriously its overriding legal and moral task of

³⁴¹ Memorial (Curtis), ¶¶ 24, 25, 116. ↩
³⁴² Memorial (Curtis), ¶ 23; Reply (Curtis), ¶ 124. Tr. Day 1, p. 164: 19-25, p. 165-166:1-18. ↩
³⁴³ Memorial (Curtis), ¶ 23. ↩

[Page 96]

seeking the truth and dispensing justice according to law on that basis, can pass over such evidence, close its blinkers and proceed to build on its now severely contestable findings, ignoring the existence and the relevance of such glaring evidence.
It would be shutting itself off by an epistemic closure into a subjective make-believe world of its creation; a virtual reality in order to fend off probable objective reality; a legal comedy of errors on the theatre of the absurd, not to say travesty of justice, that makes mockery not only of ICSID arbitration but of the very idea of adjudication.”³⁴⁴

355. Overlooking the degraded body of language within the Arbitral Tribunal, we note that the dissenting arbitrator's remarks question his colleagues' ability to exercise sound judgment in evaluating the evidence presented to them. The only allusion to the majority's state of mind is in the opening section of the above discourse:

“This reasoning (ground, motif) of the Majority Decision is revealing in more ways than one. Apart from a general attitude vis-à-vis the Respondent, it reveals an important error in the establishment of facts on the part of the Majority Decision, by assuming that the Confidentiality agreement was in effect in June 2007, while it had on record before it evidence to the contrary.”³⁴⁵

356. The expression “Apart from the general attitude vis-à-vis Respondent" depicts a negative perception of the Venezuela by the majority arbitrators, however, there are no indicators provided by the dissenting arbitrator of the suspected hostility that would comfort his subjective impression of these Colleagues' attitude. The developments on the supposed majority's gross error of judgment on which the dissenting opinion concentrates cannot be sufficient to show that these alleged procedural violations would be inspired by a will to do ill. A fair-minded observer would not find in such bare allegations, even if made by a co-arbitrator, a real possibility of a lack of impartiality. Venezuela brings no demonstration that the Award incorporating the 2017 Interim Decision which dismissed Venezuela's third application for reconsideration³⁴⁶ was contaminated by the refusal of Judge Keith and Mr. Fortier to reconsider the 2013

³⁴⁴ A/R-41 [Curtis] / A/R-82 [De Jesús], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶¶ 17, 22, 66-67. ↩
³⁴⁵ A/R-41 [Curtis] / A/R-82 [De Jesús], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶ 16. ↩
³⁴⁶ A/R-1 [Curtis] / A/R-42 [De Jesús], Award, dated 8 March 2019, (“Award”), ¶¶ 42-43. ↩

[Page 97]

Decision and not made by a properly constituted arbitral tribunal with Judge Keith and Mr. Fortier.

(b) No consent to Prof. Abi-Saab's resignation

357. According to the Applicant, Mr Fortier reaffirmed the appearance of a lack of impartiality when, he and Judge Keith withdrew their consent to Prof. Abi-Saab's resignation on 20 February 2015.³⁴⁷ The decision of Mr Fortier and Judge Keith was conveyed to the Parties on 4 March 2015 with the following explanations:

“Over a very lengthy period the two Arbitrators, particularly the President, have urged Professor Abi-Saab to complete his dissent and then, as he had himself indicated, to resign from the Tribunal so that the Respondent could appoint a replacement arbitrator. The President kept stressing the urgency of the matter and Professor Abi-Saab in mid-November, while saying that he still expected to complete the dissent by the end of that month, indicated that if he had not completed by the end of the year, he would have to resign in any event. In the course of those exchanges, the two arbitrators plainly did consent to the proposed resignation.
The two arbitrators did not however consent to a resignation in late February when the quantum hearing was only seven weeks away and a challenge to one of the arbitrators was pending.”³⁴⁸

The terms of this decision, which was confirmed on 23 March 2015,³⁴⁹ make plain that Prof. Abi-Saab's resignation was ineluctable because of his health problems. The completion of his dissent to the Decision on Jurisdiction and the Merits of 3 September 2013, which he envisaged to do by the end of 2014 at the latest, was the only pending issue for Prof. Abi-Saab in order to formalize his resignation. The Applicant says that the issue before the Committee is whether Mr Fortier and Judge Keith had absolute discretion to deny consent when imperious health reasons are good cause for resignation.³⁵⁰

³⁴⁷ Memorial (Curtis), ¶¶ 49, 116-117; Reply (Curtis), ¶ 134. Tr. Day 1, p. 167:14-25, p. 168-169-170-171:1-19. Tr. Day 3, p. 21:15-25, pp. 22, 23. ↩
³⁴⁸ A/R-61 [Curtis] / A/R-102 [De Jesús], ICSID March letter. ↩
³⁴⁹ A/R-68 [Curtis] / A/R-109 [De Jesús], Letter from Gonzalo Flores, Secretary of the Tribunal, to the Parties, 23 March 2015 (“ICSID March letter II"). ↩
³⁵⁰ Tr. Day 3, p. 24: 10-23; p. 25: 12-18. ↩

[Page 98]

358. The principle of Prof. Abi-Saab's resignation was endorsed by the Majority arbitrators, however not the time of his resignation. Withdrawal of consent was therefore not in issue. Prof. Abi-Saab himself admitted in his letter of resignation “I hope that by resigning at this juncture, before the oral hearings on quantum, I mitigate to some extent the negative effect that my resignation might have."³⁵¹ By disagreeing with Prof. Abi-Saab on the timing of his resignation with immediate effect on 20 February 2015³⁵² as disruptive of the forthcoming quantum hearing on 13-17 April 2015 that had been planned since 1 August 2014 with Prof. Abi-Saab's consent,³⁵³ Mr Fortier and Judge Keith acted within the bounds of ICSID Convention Article 56(3) and ICSID Arbitration Rule 8(2). These provisions have a wider prospect than preventing the collusion between an arbitrator and the appointing party. They aim at the expediency and non-frustration of the proceedings as well as the preservation of the immutability of the arbitral tribunal which is further endorsed by the Convention's provisions on the death and incapacity and disqualification of arbitrators.³⁵⁴ Prof. Abi-Saab's colleagues opined that a resignation in 2014 would not have disrupted the organization of the Hearing four months after but considered it disruptive even weeks before in February 2015. The Applicant's comment that “[w]ith respect to the timing of the quantum hearing, if Prof. Abi-Saab had resigned at the end of 2014, as Judge Keith and Mr Fortier apparently would have preferred, and respondent had been granted the normal time period to appoint a replacement, there is simply no way in which anyone could reasonably have expected the quantum hearing to take place on April 13, 2015, unless the replacement arbitrator would have gone into the hearing wholly unprepared. That is not a serious way to conduct a hearing”³⁵⁵ is a matter of speculation about what

³⁵¹ A/R-142 [Curtis] / A/R-154 [De Jesús], Letter from Professor Abi-Saab to Judge Keith and Mr. Fortier, 20 February 2015 (“Prof. Abi-Saab letter to co-arbs"). ↩
³⁵² A/R-68 [Curtis] / A/R-109 [De Jesús], ICSID March letter II. ↩
³⁵³ A/C-89, Email from the ICSID Secretariat to the Parties, 20 February 2015. ↩
³⁵⁴ Counter-Memorial (Conoco), ¶¶ 321, 322. ↩
³⁵⁵ A/R-60 [Curtis] / A/R-101 [De Jesús], Letter from Respondent to the Secretary of the Tribunal, dated 4 March 2015 ("Respondent 4 March 2015 letter"). Memorial (Curtis), ¶ 131. ↩

[Page 99]

would have happened, should a replacement arbitrator have been appointed early 2015. It raises no justifiable doubt of a lack of impartiality of Judge Keith and of Mr Fortier.

359. Was their refusal to consent to Prof. Abi-Saab's resignation made in retaliation for the challenge of Mr. Fortier which was pending since 6 February 2015?³⁵⁶ The correspondence sent by Prof. Abi-Saab to ICSID's Secretary General on 25 March 2015 alludes to an exchange of correspondence with Judge Keith who insisted on the submittal of the dissenting opinion by 6 February before adding “[t]he next step is for you to resign at that point.”³⁵⁷ Prof Abi-Saab commented on this offer of resignation: “But he did not write that otherwise, the acceptance of the resignation would be withdrawn."³⁵⁸ It cannot be concluded from Judge Keith's correspondence with Prof. Abi-Saab that Mr Fortier was more inspired by vengeance than by the expediency of the proceedings when deciding with Judge Keith to refuse the resignation. It remains the turn-about of Judge Keith narrated by Prof. Abi-Saab in the same correspondence, which Venezuela says, can only explain by retaliation against Mr Fortier's second challenge as there can be no justification to consent on 6 February and to withdraw consent in matter of days after on the pretence of severe disorganization of the forthcoming hearing.³⁵⁹ We agree with Venezuela that, were this the case, the resignation sequence would be nonsensical.³⁶⁰ Conoco considers that the Chair engendered no annullable error in rejecting the second challenge to the Tribunal majority in its Decision of 1 July 2015.³⁶¹ The Chair's Decision of 1 July 2015, pointed “[i] n their reasons Judge Keith and Mr Fortier noted that Prof. Abi-Saab had indicated he would complete his dissent by the end of November and that he would resign by the end of 2014 in any event. However, the dissent was not issued until February 19, 2015 and the resignation was not tendered until February 20, 2015.”³⁶² The Chair found that

³⁵⁶ Memorial (Curtis), ¶ 56. A/R-43 and A/R-132 [Curtis] / A/R-84 [De Jesús], Letter from Respondent to the Secretary-General of ICSID, dated 6 February 2015. Tr. Day 1, p. 171: 13-19. ↩
³⁵⁷ A/R-110 [De Jesús] / A/R-69 [Curtis] Abi-Saab email to ICSID. ↩
³⁵⁸ A/R-110 [De Jesús] / A/R-69 [Curtis] Abi-Saab email to ICSID. ↩
³⁵⁹ Memorial (Curtis), ¶ 56; Counter-Memorial (Conoco), ¶ 302. Tr. Day 1, p. 167:4-13. ↩
³⁶⁰ Memorial (Curtis), ¶ 145. ↩
³⁶¹ Counter-Memorial (Conoco), ¶¶ 326-329. ↩
³⁶² A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 89. ↩

[Page 100]

"[i]t is evident that the Respondent and the challenged arbitrators differ on the appropriate procedure and the circumstances that would warrant a refusal to consent to Prof. Abi-Saab's resignation under Article 56(3) of the ICSID Convention and ICSID Arbitration Rule 8(2). However, this difference of views does not demonstrate apparent or actual bias on the part of Judge Keith or Mr. Fortier.”³⁶³

360. In light of the position adopted by Mr Fortier and Judge Keith on 4 March 2015, the time of the consent needed to be agreed if the resignation came in 2015, it is unlikely that Judge Keith would have taken it upon himself to invite Prof. Abi-Saab to resign at whatever date immediately after he terminated his long-awaited dissenting opinion. Judge Keith's allusion to Prof Abi-Saab's resignation as “the next step” can only be understood in this overall context and does not, in isolation, disclose as the Applicant claims,³⁶⁴ that he was ill-disposed against Venezuela to strip it of its right to appoint a substitute arbitrator. The refusal of resignation would not give rise to a reasonable apprehension of bias in the fair-minded observer. The Committee concludes that the decision of Judge Keith and Mr. Fortier has not tainted the arbitration and its outcome, Award.

iii. Arbitrator Bucher (constitution of the Arbitral Tribunal)

361. Venezuela's last contention on the count of Article 52(1)(a) concerns the appointment of Prof. Bucher by the Chairman of the ICSID Administrative Council, in violation of its fundamental right to appoint an arbitrator in replacement of Prof. Abi-Saab.³⁶⁵ Venezuela questions the participation of Mr Fortier together with Judge Keith in the decision of 4 March 2015 as Mr Fortier was under challenge since 6 February 2015.³⁶⁶

362. Arbitration Rule 9(6) reads: “The proceeding shall be suspended until a decision has been taken on the proposal" [to disqualify an arbitrator]. Arbitration Rule 9(6) prevents the continuation of the proceeding and the making of awards with an improperly

³⁶³ A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 90. ↩
³⁶⁴ Memorial (Curtis), ¶ 146. ↩
³⁶⁵ Memorial (Curtis), ¶¶ 148-154; Reply (Curtis), ¶ 138. ↩
³⁶⁶ Memorial (Curtis), ¶¶ 124, 136, 138, 144; Tr. Day 1, p. 162:11-23. ↩

[Page 101]

constituted arbitral tribunal, avoiding thereby the repetition of such procedural steps with the newly appointed arbitrator.

363. The Committee interprets the ICSID Convention and Rules in light of their objective and purpose to encourage procedural efficiency and economy in the parties' interest. Such objective is fully attained with the suspension of the proceeding as envisaged by Arbitration Rule 9(6). The proceeding which are suspended cover all the procedural provisions of the case, including the working of the tribunal on the case, not the provisions on the constitution of the arbitral tribunal, resignation, disqualification and vacancies. Procedural efficacy requires that these provisions remain fully operative in order to resume the proceeding with a properly constituted arbitral tribunal. Arbitration Rule 9(6) suspends the proceeding not the arbitrators.³⁶⁷ It cannot be that Mr Fortier (and Judge Keith)³⁶⁸ would be suspended as of 6 February 2015 from participating in the resignation process while Prof. Abi-Saab would not be suspended from tendering his resignation on 20 February 2015.³⁶⁹ It would be otherwise hardly logical to give full force to Arbitration Rule 11 on filling the vacancy by calling a party to appoint a new arbitrator while freezing Arbitration Rule 8 which addresses the resignation process of the arbitrator prior to opening the vacancy and the manner of filling such vacancy.³⁷⁰ Not without amusement, the Conoco Parties note: “Venezuela is effectively asking this Committee to conclude that the Second Individual Fortier Challenge suspended the arbitration for everyone except Venezuela... [If Venezuela's position were correct] then every party-appointed arbitrator who resigned during the pendency of a challenge to a different arbitrator would automatically be replaced by the appointing party rendering Article 56(3) meaningless.”³⁷¹ Mr Fortier was under the

³⁶⁷ Memorial (Curtis), ¶ 55. A/R-60 [Curtis] / A/R-101 [De Jesús], Respondent 4 March 2015 letter. ↩
³⁶⁸ Memorial (Curtis), ¶ 54. Tr. Day 3, p. 25:19-25, p. 26:1-2. ↩
³⁶⁹ A/R-142 [Curtis] / A/R-154 [De Jesús], Prof. Abi-Saab letter to co-arbs. Counter-Memorial (Conoco), ¶¶ 353-354. ↩
³⁷⁰ Tr. Day 2, p. 135: 23-25, p. 136: 1-2. ↩
³⁷¹ Rejoinder ¶ 90. Tr. Day 2, p. 136: 7-17: “First, consider Venezuela's solution, and that now appears on the left-hand side of the slide. Venezuela wanted step 1 to be its appointment of Professor Abi-Saab's replacement; step 2 to be a decision on Fortier challenge. But if that had occurred, there would have been no step 3: there would be no decision on the orange action, no decision on whether to consent to Professor Abi-Saab's resignation, because Venezuela would have already appointed a replacement arbitrator. So Venezuela's approach just reads Article 56(3) out of the Convention." ↩

[Page 102]

duty to participate in the resignation process of Prof. Abi-Saab in order to allow the filling of the vacancy on the Tribunal. This also applies to Judge Keith.

364. The appointment procedure of Prof. Bucher in replacement of Prof. Abi-Saab on 10 August 2015³⁷² accordingly complied with the ICSID Convention and Rules. We add that inviting the Parties to submit observations on the resignation of an arbitrator³⁷³ is excellent practice considering the importance of the immutability of the arbitral tribunal in the ICSID Convention and Arbitration Rules. Besides, the Applicant does not state where and why the ICSID Convention and Arbitration Rules forbids arbitrators from addressing the parties on the issue.³⁷⁴ Collecting the parties' views on events which affect the existence or the validity of the composition of the tribunal cannot be considered as weakening the replacement process of an arbitrator. The Committee thus concludes that the Arbitral Tribunal was also properly constituted with the appointment of Prof. Bucher.

A.1(4)(2) IMPROPER CONSTITUTION AS ARGUED BY VENEZUELA (DE JESÚS)

i. Arbitrator Fortier (Independence and Impartiality)

365. The improper constitution of the Arbitral Tribunal because of Mr Fortier, the arbitrator appointed by Conoco, essentially concerns Mr Fortier's association with the law firm of Norton Rose of which he was a partner. The issue arose when a merger occurred during the arbitration proceedings with the firm of Macleod Dixon which advised adverse interests to those of Venezuela, including Conoco in an ICC case together with Freshfields, Conoco's present co-counsel in ARB/07/30 against the state company Petróleos de Venzuela (PDVSA) involving the Hamaca and Petrozuata Association Agreements also on issue in the underlying arbitration. We address Venezuela's first criticism of Mr Fortier's relationship with Norton Rose at the time of the merger which should have led him to resign from the Arbitral Tribunal.³⁷⁵ Instead, Mr Fortier decided

³⁷² A/R-160 [Curtis], Letter from Meg Kinnear, Secretary-General of ICSID, to the Parties, dated 10 August 2015. ↩
³⁷³ A/R-157 [Curtis] / A/R-158 [De Jesús], E-mail from Gonzalo Flores, Secretary of the Tribunal, to the Parties, dated 23 February 2015 “ICSID Email 23 February 2015". ↩
³⁷⁴ Memorial (Curtis), ¶ 121. ↩
³⁷⁵ Memorial (De Jesús), ¶¶ 32-34. Reply (De Jesús), ¶¶ 129, 163. ↩

[Page 103]

to resign from Norton Rose as he explained to the other Members of the Arbitral Tribunal in a letter of 18 October 2011:

“My decision to resign from Norton Rose OR is motivated by my desire to continue my practice as arbitrator and mediator without having to contend with the risks of conflicts inherent to being a partner in a Firm associated with a global law practice. It is a decision which I have been considering very carefully since November 2010 when Ogilvy Renault announced that it would join the international law practice of Norton Rose Group through a Swiss Verein as of 1 June 2011, and again following the Firm's decision, announced on 5 October 2011, to merge with Macleod Dixon as of 1 January 2012."³⁷⁶

366. The purpose of a disclosure is to allow the parties to evaluate how much they agree or disagree with the arbitrator's assessment of the situation. Making a disclosure is not reprehensible and nothing in the facts and circumstances disclosed should be taken as an admission by the arbitrator of his inability to serve in an independent and impartial way, otherwise, the arbitrator should have resigned. Mr Fortier informed verbally the Secretary General of ICSID on 6 October 2011, the same day when the voting on the merger closed, then in writing on 4 October 2011³⁷⁷ of the situation created by the merger with Venezuela but maintained that it would have no bearing on his ability to exercise independent judgment:

“I am making this disclosure at the first possible opportunity, the partners of the two partnerships involved in this merger having been presented with this possible transaction and called upon to vote on it between Saturday, 1 October 2011, and Monday 3 October 2011, and the merger having been announced on the morning of Tuesday, 4 October 2011."³⁷⁸

367. An arbitrator's failure to disclose certain facts and circumstances does not necessarily mean that a conflict of interest exists. Venezuela proposes the standard of an appearance of dependence or bias which is commonly used by ad hoc committees.³⁷⁹

³⁷⁶ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs. ↩
³⁷⁷ Tr. Day 2, p. 103: 1-9. ↩
³⁷⁸ A/R-52 [Curtis] / A/R-93 [De Jesús], Fortier email to ICSID SG. ↩
³⁷⁹ Reply (De Jesús), ¶ 142. Eiser Annulment Decision, ¶ 206; EDF Annulment Decision, De Jesús ¶ 109. ↩

[Page 104]

The disqualification test is not whether bias has affected the decision (actual bias) but whether facts and circumstances exist giving rise to a reasonable suspicion or apprehension of bias in the fair-minded observer. The test is thus an objective one³⁸⁰ as the fair-minded and informed observer does not have an interest in the outcome of the arbitration other than the interest of advancing natural justice and due process.

368. Mr Fortier indicated in a letter to his two other colleagues on 17 November 2011, that he only:

“apprised of the professional relationship between Macleod Dixon and ConocoPhillips Company late in the week of September 26 [2011]."³⁸¹

The Applicant contends that Mr Fortier concealed an obvious conflict of interest for approximately ten days between 26 September and 3 October 2011, which allowed his bias to linger throughout the proceedings.³⁸²

369. The fair minded observer would take knowledge that Mr Fortier also indicated in his disclosure to the Secretary General on 4 October 2011, that he conducted conflict checks when he became aware of the merger to take effect on 1 January 2012, and that an ethical wall had been put in place the following day, on 5 October 2011.³⁸³ In his letter of 18 October 2011, to the other members of the Arbitral Tribunal informing of his resignation from Norton Rose with effect on 31 December 2011,³⁸⁴ Mr Fortier declared:

³⁸⁰ A/RLA-47 [Curtis] / A/RLA-82 [De Jesús], Caratube Disqualification Decision, ¶ 54: “'an objective standard based on a reasonable evaluation of the evidence by a third party' or, in other words, on the 'point of view of a reasonable and informed third person”. ↩
³⁸¹ A/R-139 [Curtis] / A/R-148 [De Jesús], Fortier November letter to co-arbs. ↩
³⁸² Memorial (De Jesús), ¶ 128; Reply (De Jesús), ¶ 156. ↩
³⁸³ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs: “I confirm that the ethical screen to which I referred in my disclosure letter of 4 October 2011 to the Secretary General of ICSID was, in fact, put in place on 5 October 2011 and will remain in place”. ↩
³⁸⁴ As Mr Fortier explained in his letter of 18 October 2011, resignation from Norton Rose “is a decision which I have been considering very carefully since November 2010 when Ogilvy Renault announced that it would join the international law practice of Norton Rose Group through a Swiss Verein as of 1 June 2011, and again following the ↩

[Page 105]

“Yesterday, I informed the members of the Executive Committee of Norton Rose OR (known before 1 June 2011 as Ogilvy Renault and referred to herein as the "Firm") that I have decided to resign from the Firm, effective 31 December 2011 [...] It should be of interest to you and to the parties to know that I have not been involved in any way in the negotiation which lead to the announcement of the Firm's forthcoming merger with Macleod Dixon. In addition, in reply to point (vi) of the Respondent's letter to you of 13 October 2011, I have not taken part in or been privy to the plans (if any) ‘for the coordination of the international arbitration group and the business plan for promoting the combined firm's expertise in this area.’”³⁸⁵

He reaffirmed to them on 17 November 12011, that he had:

“no knowledge of any file (if indeed any exists) ‘on which lawyers from Norton Rose and Macleod Dixon have already been working together'. I can categorically state that I have had no involvement whatsoever in any such file, nor have I been made privy to any information about any such file.”³⁸⁶

370. Mr Fortier conducted his duty to investigate about the consequences of the Norton Rose merger for his position as arbitrator and disclosed that Macleod Dixon was acting adversely to Venezuela. There was thus no failure to disclose by lack of knowledge which Mr Fortier could have made reasonable inquiries into.³⁸⁷ Mr Fortier bore the identity of Norton Rose until 31 December 2011, when his resignation became effective. He however never had the identity of the combined Norton-Rose/ Macleod Dixon firm which came into existence only on 1 January 2012, and whose activities could not automatically have created a conflict of interest for Mr Fortier before that date. An ethical wall came into effect almost simultaneously with the public announcement of the merger. As the vote on the merger only occurred on 1 and 3 October 2011, a fair-minded observer, informed of such facts and circumstances, would not conclude that there would have been a real possibility of a lack of independence or impartiality on the part of Mr Fortier during the ten days which preceded his disclosure.

Firm's decision, announced on 5 October 2011, to merge with Macleod Dixon as of 1 January 2012." (A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbitrators).
³⁸⁵ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs. ↩
³⁸⁶ A/R-139 [Curtis] / A/R-148 [De Jesús], Fortier November letter to co-arbs. ↩
³⁸⁷ Reply (De Jesús), ¶¶ 159, 160. ↩

[Page 106]

371. Still in his letter of 18 October 2011, to his colleagues, Mr Fortier further mentioned about his relation to Norton Rose after his resignation:

“There are members of Norton Rose OR who have assisted me in certain files in which I serve as an arbitrator - e.g. by acting as Administrative Secretary to the Tribunal - whom I may continue to call upon for assistance after 1 January 2012. In such event, I will make arrangements with Norton Rose Canada in order for the time of these individuals to be billed to me by Norton Rose Canada. The only person who has assisted me in the present file is Ms. Rachel Bendayan, a junior associate of the Firm's Litigation Group based in Montreal, and she has already signed the undertakings establishing the ethical wall in place since 5 October 2011. Ms. Bendayan has not done any work in this matter since August 2011 and I will not call upon her or anyone else from Norton Rose OR/Norton Rose Canada to assist me in this matter in the future.”³⁸⁸

372. Mr Fortier, Venezuela says, continued to foster his professional relationship with Norton Rose despite his awareness that these constituted a conflict of interest. Mr Fortier maintained substantive professional relationships via close connections with three lawyers at Norton Rose which each demonstrate in themselves that he could not be relied upon to exercise independent judgment and that collectively demonstrate that Mr Fortier's participation in the Arbitral Tribunal deprived the Applicant of its right to an independent and impartial tribunal.³⁸⁹

373. The Committee notes that the involvement of the Norton Rose lawyers fell within the scope of the information provided by Mr Fortier on 18 October 2011, about continued assistance of Norton Rose members after his resignation to arbitral tribunals to the exception of the underlying arbitration. The Applicant's complaint that Mr Fortier's disclosure was not a licence to maintain an ongoing substantive professional relationship needs to be grounded on elements that would evidence the inaccuracy of

³⁸⁸ A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbitrators. ↩
³⁸⁹ Memorial (De Jesús), ¶ 49. Reply (De Jesús), ¶ 202. ↩

[Page 107]

the information in his letter of 18 October 2011.³⁹⁰ Venezuela speaks of disingenuous misrepresentations.³⁹¹

374. Ms Bendayan served from 18 October 2011 to 10 October 2014, as assistant to Mr Fortier in the Agility ICSID case which does not detract from the disclosure even if her appointment was on the same day as Mr Fortier's announcement of his resignation from Norton Rose.³⁹² Ms Fitzgerald, another Norton Rose lawyer, served as assistant to two Zimbabwe ICSID cases. Ms Fitzgerald's appointment took effect on February 2012, two months after Mr Fortier left Norton Rose, long after Mr Fortier's resignation according to Venezuela. However, her appointment was agreed before Mr Fortier's resignation.³⁹³ With that precision, the conditions of Ms Fitzgerald's appointment do not reveal an intrusion of Macleod Dixon in the proper discharge by Mr Fortier of his arbitrator's duties in the underlying arbitration.³⁹⁴

375. The same conclusion should be drawn from Mr Valasek's role as secretary of the Yukos tribunals. Conoco observes that the Chairman's Decision of 1 July 2015 which found that Venezuela's arguments on the scope of Mr Valasek's role were unsubstantiated and that, even if it was true that Mr Valasek acted beyond his stated role, there still was no causal relation between Mr Fortier's incapacity to exercise independent judgement and Mr Valasek's partnership in Norton Rose³⁹⁵ was plainly reasonable.³⁹⁶ We note the absence of a causal relation between Mr Fortier's incapacity to exercise independent

³⁹⁰ Memorial (De Jesús), ¶ 49. ↩
³⁹¹ Memorial (De Jesús), ¶ 54. ↩
³⁹² Memorial (De Jesús), ¶ 55. ↩
³⁹³ Memorial (De Jesús), ¶ 54, Reply (De Jesús), ¶ 179. ↩
³⁹⁴ Counter-Memorial (Conoco), ¶ 189 refers to the Chairman's Decision of 1 July 2015 which noted that: "The fact that certain members of Norton Rose were acting as tribunal assistant in arbitrations presided over by Mr. Fortier has been known since 2011 and was included in his disclosure of October 2011. This was raised in 2011 in the First Proposal, which proposal was rejected by Judge Keith and Prof. Abi-Saab. The Respondent has provided no new facts in this respect. Accordingly, to the extent the current Proposal is based on this assertion, it is untimely and is rejected" (A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 66). This passage illustrates well the difference between the remits of a Disqualification Authority under ICSID Convention Articles 57-58 and of the Committee under Article 52(1)(a). It was plainly reasonable for the Chairman to reject a proposal as untimely. It would not be reasonable for the Committee not to examine the assertions made by Venezuela pertaining to Mr Fortier's independence and impartiality when its challenge of the Award under Article 52(1)(a) is admissible. It thus behoves the Committee to examine the facts in support of the challenge under Article 52(1)(a). ↩
³⁹⁵ A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 95. ↩
³⁹⁶ Counter-Memorial (Conoco), ¶ 189. ↩

[Page 108]

judgement and Mr Valasek's partnership in Norton Rose, the deduction proposed by Venezuela that Mr Valasek necessarily espouses the Conoco Parties' position in the underlying arbitration as would be demonstrated by his laudation of Conoco's experts in an article, or his purported acting as a fourth arbitrator in the Yukos arbitration according to the allegations made by Russia in its efforts to resist enforcement of the Yukos awards which, in the Applicant's view, involved very similar issues to those of the underlying arbitration.³⁹⁷ There is no evidence that the continued implication of the Norton Rose lawyers under the above-mentioned circumstances gave rise to a financial interest for Mr Fortier in breach of the assurances given in the 18 October 2011 where he also disclosed that any remuneration would cease from Norton Rose as of 31 December 2011, including any retirement benefit.³⁹⁸

376. Mr Fortier, adds the Applicant, also continued to reap benefits through economic arrangements for secretarial and other support services made with Services OR LP/SEC (“Services OR”), a wholly owned subsidiary of Norton Rose. The Applicant submits that these business arrangements, like the continued relationship with Norton Rose lawyers, form part of a pattern of circumstances that should have prevented Mr Fortier's participation as an arbitrator.³⁹⁹ The Applicant refers to these arrangements as enabling Mr Fortier to benefit from his secretaries' services while not himself paying for their salaries or benefits. Conoco points to the Decision of the Chair of 1 July 2015 which held that the proximity of office space was irrelevant for determining Mr Fortier's independence and impartiality⁴⁰⁰ and to the Decision rendered by Mr Zuleta and Prof. Bucher on 26 July 2016 which considered that even if Venezuela's allegations on the benefits reaped by Mr Fortier from the arrangement were true, Venezuela had failed to show how those benefits affected Mr Fortier's ability as arbitrator or how they

³⁹⁷ Memorial (De Jesús), ¶¶ 51-53, Reply (De Jesús), ¶¶ 175-177. ↩
³⁹⁸ "As of [31 December 2011] I will no longer be a member of the Firm and will thus cease to earn any remuneration from Norton Rose OR. For your additional information, I have no entitlement to any retirement benefit from the Firm" (A/R-53 [Curtis] / A/R-94 [De Jesús], Fortier October letter to co-arbs). ↩
³⁹⁹ Memorial (De Jesús), ¶¶ 56, 57. Reply (De Jesús), ¶¶ 181-185. ↩
⁴⁰⁰ A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶ 96. ↩

[Page 109]

would lead a reasonable third person to conclude that Mr Fortier manifestly lacked the ability act impartially in the arbitration.⁴⁰¹

377. The Committee notes that on 22 July 2016, Venezuela again proposed to disqualify Mr Fortier referencing those circumstances which were learned after receiving a disclosure from Mr Fortier on 22 July 2016. Mr Fortier had informed in a letter of 22 July 2016, to the Secretary General of ICSID that he had billing arrangements for the staff who wished to continue participating in the insurance and other benefits offered by Services OR.⁴⁰² On 26 July 2016, the unchallenged Tribunal members, Mr Zuleta and Mr Bucher dismissed the challenge,⁴⁰³ in advance of the hearing which was scheduled for mid-August 2016. A fair-minded observer, having knowledge that Mr Fortier paid Services OR for the staff which worked for his arbitrator's practice, would not have regarded such arrangements as an indication of Mr Fortier's inclination towards interests adverse to those of Venezuela in the underlying arbitration. The erroneous self-description on the social media of one of his staff members as employed by Norton Rose and instead of Services OR does not change the conclusion. To sum up, a fair- minded observer, with knowledge of all the circumstances of Mr Fortier's disclosure of the merger, would conclude, that the facts surrounding his relationship with Norton Rose, before and after his resignation from that firm, do not give rise to justifiable doubts as to his independence or impartiality. No appearance of bias existed from an objective point of view.

378. Even assembled, futile facts and circumstances cannot give rise to a reasonable suspicion of bias and are irrelevant to ground a challenge under Article 52(1)(a). Venezuela has failed to demonstrate from all the above facts and circumstances denounced in support of its Article 52(1)(a) ground the existence of an appearance of bias on behalf of Mr Fortier that would have materially affected the Award of 8 March 2019.

⁴⁰¹ A/R-153 [Curtis] / A/R-174 [De Jesús], Challenge Decision - Fortier IV, ¶¶ 15-17 ↩
⁴⁰² A/R-151 [Curtis] / A/R-151 [De Jesús], Letter of Mr Fortier to the ICSID Secretariat of 22 July 2016. ↩
⁴⁰³ A/R-153 [Curtis] / A/R-174 [De Jesús], Challenge Decision - Fortier IV. ↩

[Page 110]

ii. Arbitrators Keith and Fortier (Independence and Impartiality)

379. The Committee therefore proceeds further with Mr Fortier's conduct in the underlying arbitration, this time because of his deeds with Judge Keith. The Applicant contends that the events demonstrate that neither of them could be relied upon to exercise independent judgment because of their general negative attitude towards Venezuela.⁴⁰⁴

(a) Refusal to reconsider the 2013 Decision on Jurisdiction and Liability

380. There is at first Mr Fortier's refusal, together with Judge Keith, to reconsider their majority Decision on Jurisdiction and the Merits of 3 September 2013. Venezuela finds guidance in the statements of Prof. Abi-Saab, the dissenting arbitrator, who characterized the attitude of his fellow arbitrators:

“Apart from a general attitude vis-à-vis the Respondent, [the majority's reasoning] reveals an important error in the establishment of facts on the part of the Majority Decision, by assuming that the Confidentiality agreement was in effect in June 2007, while it had on record before it evidence to the contrary. Indeed, the question of the date of entry into force of the Confidentiality agreement was put to Counsel for the Respondent during the oral hearings. His answer was that it did not come into force until November 2007. This answer was neither challenged nor contradicted by the Claimants during the Hearings and was even confirmed by them later on.

Thus, the Majority Decision committed a material error in establishing the facts. But worse still, it drew from it by inference, a grave legal consequence: not only that the Respondent has breached its confidentiality obligation by submitting to the Tribunal the Claimants offers of June and August 2007, when that obligation had not yet come into effect; but also, and ex hypothesi, that the Respondent would not have hesitated to do the same, i.e. submit to the Tribunal any proposition it would have made during the final period of negotiations, had they existed, in violation of its confidentiality obligation which indeed covered that final period. In other words, the Majority Decision predicated, not on the basis of positive proof, but by divination or sheer fiat, a presumption — drawn from a single misconceived instance involving an error of fact — of a constant pattern of conduct attributable to the

⁴⁰⁴ Memorial (De Jesús), ¶¶ 61, 62. ↩

[Page 111]

Respondent, of not hesitating to violate its obligations whenever it suited its purposes.”⁴⁰⁵

381. The expression “[a] part from the general attitude vis-à-vis Respondent” depicts a negative perception of the Applicant by Mr Fortier and Judge Keith in the dissenting arbitrator's mind. On this point, the Committee considers that bare allegations, even made by a co-arbitrator,⁴⁰⁶ cannot be sufficient. There are no indicators provided by the dissenting arbitrator of the suspected hostility that would confirm his subjective impression. The dissenting arbitrator concentrates on the following developments on the majority's alleged gross error of judgment and ability to exercise sound judgment in evaluating the evidence presented to them:

“22 – It is worth noting in this regard that, in order to reach its conclusions concerning the final period of negotiations, the Majority Decision, having admitted possessing no evidence at all for that period, had to make a leap of faith, encompassing three steps, a) relying almost exclusively and uncritically on the affirmations and representations of the Claimants throughout the proceedings, insisting that they did not receive any offer beyond the initial one concerning the Petrozuata and the Hamaca projects. But in order for this version to prevail, the Majority Decision had to neutralize any contradictory evidence by b) shedding away as lacking credibility the general statements of Dr. Mommer in his written and oral testimonies that Venezuela was always willing to pay just compensation, and that the negotiations failed because of the intransigent and exaggerated demand of the Claimants; as well as c) denying any legal significance and effect to "whatever confidentiality agreement there was.” 23 – The error committed by the Majority Decision as described above, was easily detectable from the record at the disposal of the Tribunal at the time that Decision was issued [...].”⁴⁰⁷

⁴⁰⁵ A/R-82 [De Jesús] / A/R-41 [Curtis], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶¶ 16,17. Memorial (De Jesús), ¶ 68. ↩
⁴⁰⁶ Tr. Day 3, p. 4: 23-25, p. 5: 1-23. ↩
⁴⁰⁷ A/R-82 [De Jesús] / A/R-41 [Curtis], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶¶ 22, 23 (emphasis added). ↩

[Page 112]

382. Venezuela isolates the words “exclusively and uncritically” to allege that arbitrators who exercise their functions in that manner on the representations of one party lack independence and impartiality beyond doubt.⁴⁰⁸ However, a fair-minded observer would not find in the dissenting arbitrator's remarks on his colleagues proof of apparent bias. If Prof. Abi-Saab had become apprised of facts that disclosed his colleagues' negative attitude, they are not found in his dissenting opinion. His conclusion that:

“It would be shutting itself off by an epistemic closure into a subjective make-believe world of its creation; a virtual reality in order to fend off probable objective reality; a legal comedy of errors on the theatre of the absurd, not to say travesty of justice, that makes mockery not only of ICSID arbitration but of the very idea of adjudication"⁴⁰⁹

is no causal nexus between bias and the due process violations, especially the possibility that Mr Fortier and Judge Keith would have decided against Venezuela for reasons that are not in the arbitration record even if they would have performed poorly as adjudicators.

383. Venezuela also submits that the dissenting opinion of Prof. Bucher (appointed in replacement of arbitrator Abi-Saab) to Venezuela's second Request for Reconsideration,⁴¹⁰ shared the criticism of arbitrator Abi-Saab and would assist a reasonable observer to conclude that arbitrators Keith and Fortier were biased against Venezuela.⁴¹¹ The Applicant elaborates more particularly on Prof. Bucher's characterization that his co-arbitrators' position was “categorical" to argue that Mr Fortier and Judge Keith's "decision to deny Justice was 'categorical', "⁴¹² so that Venezuela had no hope that arbitrator Keith and Fortier would hear Venezuela's case as fair and open-minded adjudicators. However, Prof. Bucher merely stated that the

⁴⁰⁸ Memorial (De Jesús), ¶ 70. ↩
⁴⁰⁹ A/R-82 [De Jesús] / A/R-41 [Curtis], Abi-Saab Dissenting Opinion – Reconsideration Request, ¶ 67. ↩
⁴¹⁰ A/R-25 [Curtis] / A/R-66 [De Jesús], Dissenting Opinion of Professor Andreas Bucher to the Decision on Respondent's Request for Reconsideration, 9 February 2016, (“Abi-Saab Dissenting Opinion II – Reconsideration Request"). ↩
⁴¹¹ Memorial (De Jesús), ¶ 72. ↩
⁴¹² Memorial (De Jesús), ¶ 75. ↩

[Page 113]

contents of a law article “did not have the effect of changing [his] Colleagues' categorical position.”⁴¹³ This is a long way from facts raising a justifiable doubt that Mr Fortier and Judge Keith's refusal to reconsider was only motivated by hostility against Venezuela. Conoco reminds on that count that the First Individual Challenge of Mr Fortier was approached by the Chairman in a both reasoned and plainly reasonable manner.⁴¹⁴ The Chair dismissed the challenge based on arbitrators Keith's and Fortier's refusal to reconsider their September 2013 Decision as he was simply unpersuaded by Venezuela's arguments that relied on personal perceptions expressed in a dissenting opinion.⁴¹⁵ Venezuela has not shown how any appearance of bias on the part of Mr Fortier and Judge Keith having had a material effect on the Award which incorporates both the 2017 Interim Decision⁴¹⁶ dismissing Venezuela's application for reconsideration of the 2013 Decision, and the 2013 Decision itself.⁴¹⁷

(b) No consent to Prof. Abi-Saab's resignation

384. There is however more to the overall negative attitude of Mr Fortier and Judge Keith which, according to Venezuela, would result from the withdrawal of consent by Mr Fortier and Judge Keith to Prof. Abi-Saab's resignation on 20 February 2015 as allegedly motivated by retaliation against Prof. Abi-Saab's Dissenting Opinion on the Decision on Jurisdiction and Merits.⁴¹⁸ The refusal of Mr Fortier and Judge Keith to

⁴¹³ A/R-25 [Curtis] / A/R-66 [De Jesús], Abi-Saab Dissenting Opinion II – Reconsideration Request, ¶ 1. ↩
⁴¹⁴ Counter-Memorial (Conoco), ¶ 163. ↩
⁴¹⁵ A/R-127 [Curtis] / A/R-181 [De Jesús], Challenge Decision – Majority I, ¶¶ 55-56. The Chairman recalled the relevant standards (Convention Articles 14(1) and 57), noting they do not require proof of actual bias, but appearance of dependence or bias (para. 52). The Chairman analysed under those standards the facts referenced by Venezuela in support of its challenge. The Chairman summarized Venezuela's arguments, finding that Venezuela was dissatisfied with the arbitrators' refusal to reconsider their Decision and to convene to a hearing on the request for reconsideration (para. 54). The Chairman found that the Tribunal had “adopted a reasonable procedure that was within its discretion to regulate the conduct of the proceeding." Further, the Chairman found that there was “nothing in the reasoning or conclusions of the Decision on Reconsideration that suggests an absence of impartiality." The Chairman, thereby, concluded that a third party undertaking a reasonable evaluation of the facts in the arbitration, would not conclude that they indicate a manifest lack of que qualities required under Convention Articles 57 and 14(1). ↩
⁴¹⁶ A/R-1 [Curtis] / A/R-42 [De Jesús], Award, ¶¶ 42-43. ↩
⁴¹⁷ A/R-1 [Curtis] / A/R-42 [De Jesús], Award, ¶ 38. ↩
⁴¹⁸ Memorial (De Jesús), ¶¶ 78, 90. ↩

[Page 114]

consent to Prof. Abi-Saab's resignation was conveyed to the Parties on 4 March 2015 with the following explanations:

“Over a very lengthy period the two Arbitrators, particularly the President, have urged Professor Abi-Saab to complete his dissent and then, as he had himself indicated, to resign from the Tribunal so that the Respondent could appoint a replacement arbitrator. The President kept stressing the urgency of the matter and Professor Abi-Saab in mid-November, while saying that he still expected to complete the dissent by the end of that month, indicated that if he had not completed by the end of the year, he would have to resign in any event. In the course of those exchanges, the two arbitrators plainly did consent to the proposed resignation. The two arbitrators did not however consent to a resignation in late February when the quantum hearing was only seven weeks away and a challenge to one of the arbitrators was pending.”⁴¹⁹

The terms of their decision make plain that Prof. Abi-Saab's resignation was ineluctable because of his health problems. The completion of his dissent to the Decision on Jurisdiction and the Merits of 3 September 2013 which Prof. Abi-Saab envisaged to do by the end of 2014 at the latest was the only pending issue for him in order to formalize his resignation.

385. The principle of Prof. Abi-Saab's resignation was endorsed by the Majority arbitrators, however not the time of his resignation. Prof. Abi-Saab himself admitted in his letter of resignation “I hope that by resigning at this juncture, before the oral hearings on quantum, I mitigate to some extent the negative effect that my resignation might have"⁴²⁰ but referred to a “surprise 'withdrawal of consent”' in a later correspondence to ICSID.⁴²¹ Mr. Fortier and Judge Keith acted within the bounds of ICSID Convention Article 56(3) and ICSID Arbitration Rule 8(2) when they considered the timing of Prof. Abi-Saab's resignation (effective on 20 February 2015) as disruptive of the next steps of the proceedings, which consisted of the hearing on quantum that had been planned since 1 August 2014 to take place on 13-17 April 2015. These provisions have a wider

⁴¹⁹ A/R-61 [Curtis] / A/R-102 [De Jesús], ICSID March letter. ↩
⁴²⁰ A/R-142 [Curtis] / A/R-154 [De Jesús], Prof. Abi-Saab letter to co-arbs. ↩
⁴²¹ A/R-110 [De Jesús] / A/R-69 [Curtis], Abi-Saab email to ICSID. ↩

[Page 115]

prospect than preventing the collusion between an arbitrator and the appointing party. They aim at the expediency and non-frustration of the proceedings as well as the preservation of the immutability of the arbitral tribunal which is further endorsed by the Convention's provisions on the death and incapacity and disqualification of arbitrators.⁴²² Prof. Abi-Saab's colleagues opined that a resignation in 2014 would not have disrupted the organization of the Hearing four months after, but considered it disruptive two months before in February 2015. Whether this is unacceptable because as Venezuela wrote to ICSID on 4 March 2015, “[w]ith respect to the timing of the quantum hearing, if Prof. Abi-Saab had resigned at the end of 2014, as Judge Keith and Mr Fortier apparently would have preferred, and Respondent had been given a normal time period to appoint a replacement, there is simply no way in which anyone could reasonably have expected the quantum hearing to take place on April 13, 2015, unless the replacement arbitrator would have gone into the hearing wholly unprepared. That is not a serious way to conduct a hearing”⁴²³ raises no justifiable doubt of a lack of impartiality of Judge Keith and of Mr Fortier who did not misuse their powers under Article 56(1) of the Convention for retaliatory action against Prof. Abi-Saab when health reasons are considered as good cause for resignation.⁴²⁴ Their refusal of resignation, and not withdrawal of prior consent to resignation, would not give rise to a reasonable apprehension of bias in the fair-minded observer. In Conoco's opinion, the Chair's Decision of 1 July 2015 dismissing the disqualification proposal was reasonable.⁴²⁵ The Chair acted properly when he referenced the applicable standards and then analyzed the facts referenced by Venezuela in light of those standards. On the arbitrators not consenting to Prof. Abi-Saab's resignation, the Chairman found no appearance of bias, but rather that Venezuela's “conclusion of bias ignore[d] the reasons of Jude Keith and Mr. Fortier in the March 4, 2015 letter which expressly cite[d] the changed circumstances prevailing by March 2015." For the Chairman, it was evident that Venezuela and the challenged arbitrators had differing views on the

⁴²² Counter-Memorial (Conoco), ¶¶ 321, 322. ↩
⁴²³ A/R-60 [Curtis] / A/R-101 [De Jesús], Respondent 4 March 2015 letter. ↩
⁴²⁴ Reply (De Jesús), ¶¶ 229, 231. ↩
⁴²⁵ Counter-Memorial (Conoco), ¶ 328. ↩

[Page 116]

appropriate procedure and circumstances warranting a refusal to consent to the resignation; yet such differing views, the Chairman found, did not show apparent of actual bias.⁴²⁶ Hence, Venezuela persists in failing to demonstrate how Mr Fortier and Judge Keith could not be relied upon to exercise independent and impartial judgment to make a valid Award because of an alleged negative attitude.⁴²⁷

iii. Arbitrator Bucher (Independence and Impartiality)

386. Venezuela's last contention on the count of Article 52(1)(a) concerns the appointment of Prof. Bucher by the Chairman of ICSID in violation of its fundamental right to appoint an arbitrator in replacement of Prof. Abi-Saab.⁴²⁸

387. The Applicant alleges a breach of ICISD Arbitration Rule 9(6). Because of the suspension of the arbitration proceeding following Mr Fortier's challenge on 6 February 2015, he should not have participated in the decision of 4 March 2015 together with Judge Keith.⁴²⁹ It is beyond dispute that, not Mr Fortier, nor Judge Keith, but the proceedings were suspended on 6 February 2015 in accordance with ICSID Arbitration Rule 9(6) as a consequence of the disqualification proposal made by Venezuela on 5 October 2011.⁴³⁰

388. In ordering a suspension of the proceeding pending a decision on the disqualification proposal, Arbitration Rule 9(6) prevents the continuation of the proceedings and the making of awards with an improperly constituted arbitral tribunal and avoids the repetition of procedural steps with the newly appointed arbitrator. The proceeding which are suspended cover all the procedural provisions of the case, including the working of the tribunal on the case, not the provisions on the constitution of the arbitral tribunal, resignation, disqualification, and vacancies. Procedural efficacy requires that

⁴²⁶ A/R-141 [Curtis] / A/R-175 [De Jesús], Challenge Decision – Majority II, ¶¶ 78-84, 89, 90. ↩
⁴²⁷ Reply (De Jesús), ¶¶ 25, 208. ↩
⁴²⁸ Memorial (De Jesús), ¶ 91. ↩
⁴²⁹ Memorial (De Jesús), ¶¶ 83, 85. ↩
⁴³⁰ A/R-142 [De Jesús] / A/R-101 [Curtis], ICSID letter to the Parties informing proceeding suspended, dated 6 February 2015. ↩

[Page 117]

these provisions remain fully operative in order to resume the proceeding with a properly constituted arbitral tribunal.

389. It cannot be that Mr Fortier would be suspended as of 6 February 2015 from participating in the resignation process while Prof. Abi-Saab would not be suspended from tendering his resignation on 20 February 2015.⁴³¹ Not without relevance, the Conoco Parties remark: “Venezuela wanted step 1 to be its appointment of Professor Abi-Saab's replacement; step 2 to be a decision on Fortier challenge. But if that had occurred, there would have been no step 3: there would be no decision on the orange action, no decision on whether to consent to Professor Abi-Saab's resignation, because Venezuela would have already appointed a replacement arbitrator. So Venezuela's approach just reads Article 56(3) out of the Convention.”⁴³²

390. The appointment of Prof. Bucher in replacement of Prof. Abi-Saab was therefore made according to the ICSID Convention and Rules. We add that inviting the Parties to submit observations on the resignation of an arbitrator⁴³³ is excellent practice considering the unique situation. The Applicant does not state where and why the ICSID Convention and Arbitration Rules forbids arbitrators from addressing the parties on the issue.⁴³⁴ Collecting the parties' views on events which affect the composition of the tribunal cannot be considered as weakening the replacement process of an arbitrator.

⁴³¹ A/R-142 [Curtis] / A/R-154 [De Jesús], Prof. Abi-Saab letter to co-arbs. Counter-Memorial (Conoco), ¶ 354, Rejoinder (Conoco), ¶ 90: “Venezuela is effectively asking this Committee to conclude that the Second Individual Fortier Challenge suspended the arbitration for everyone except Venezuela [If Venezuela's position were correct] every party-appointed arbitrator who resigned during the pendency of a challenge to a different arbitrator would automatically be replaced by the appointing party -rendering Article 56(3) meaningless." ↩
⁴³² Tr. Day 2, p. 136: 8-17. ↩
⁴³³ A/R-157 [Curtis] / A/R-158 [De Jesús], ICSID Email 23 February 2015. ↩
⁴³⁴ Reply (De Jesús), ¶ 235. ↩

[Page 118]

A.2. THE PARTIES' POSITIONS ON A SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE IN RELATION TO THE TRIBUNAL'S CONSTITUTION

391. Venezuela (Curtis and De Jesús) argues that it was deprived of the right to an independent and impartial tribunal, warranting annulment due to improper constitution as well as a serious departure of a fundamental rule of procedure under Article 52(1)(d).⁴³⁵

392. The Committee will first summarize the arguments of Venezuela as represented by Curtis (A.2(1)) and, then as represented by De Jesús (A.2(2)) and then the arguments of the Conoco Parties (A.2(3)). The Committee's analysis of the Parties' arguments on serious departure on this issue is addressed in Section A.2(4).

A.2(1) SERIOUS DEPARTURE AS ARGUED BY VENEZUELA (CURTIS)

393. The right of a party to participate in the selection of arbitrators is a fundamental rule of procedure. Venezuela refers to various commentaries on the selection of arbitrators as a fundamental attribute of arbitration.⁴³⁶

394. Venezuela argues that Arbitrators Keith's and Fortier's withdrawal of consent to arbitrator Abi-Saab's resignation deprived Venezuela of its right to appoint an arbitrator, thus constituting a serious departure from a fundamental rule which warrants annulment.⁴³⁷

395. A party may only be deprived of its right to appoint in exceptional circumstances caused by improper conduct of a party or the existence of collusion between a party and its appointed arbitrator. Venezuela was unjustifiably deprived of its right to appoint a replacement arbitrator after the resignation of arbitrator Abi-Saab for serious health reasons. The purported withdrawal of consent followed by ICSID's appointment of a

⁴³⁵ Memorial (De Jesús), ¶ 103; Memorial (Curtis), ¶ 114. ↩
⁴³⁶ Memorial (Curtis), ¶ 156. ↩
⁴³⁷ Memorial (Curtis), ¶ 157; Reply (Curtis), ¶¶ 128-140. ↩

[Page 119]

replacement arbitrator constituted a serious departure giving rise to annulment under Convention Article 52(1)(d).⁴³⁸

A.2(2) SERIOUS DEPARTURE AS ARGUED BY VENEZUELA (DE JESÚS)

396. Venezuela argues that the facts of this case give rise to at least three circumstances in which serious departures from fundamental rules of procedure occurred. The first circumstance is the unreliability of Arbitrators Keith and Fortierin exercising independent judgment. The second is the participation of Arbitrators Keith and Fortier in deciding on Arbitrator Abi-Saab's resignation while the proceeding was suspended. Third, the Chair's decision to appoint a replacement arbitrator in lieu of Venezuela.⁴³⁹

397. On the first ground, Venezuela submits the same reasons that warrant the annulment of the Award on the grounds of improper constitution of the Tribunal also warrant the annulment on the grounds that they give rise to a serious departure from the fundamental right to be heard by an independent tribunal. This is recognized by international law and Convention Article 14. Venezuela refers to the Klöckner I committee, which held that “[i]mpartiality of an arbitrator is a fundamental and essential requirement. Any shortcoming in this regard, that is any sigh of partiality, must be considered to constitute, within the meaning of Article 52(1)(d), a ‘serious departure from a fundamental rule of procedure' [...].”⁴⁴⁰ The committees in Wena, Impregilo and Eiser have also identified the right to be heard by an independent and impartial tribunal as a fundamental rule of procedure.⁴⁴¹

398. An independent observer would find that arbitrator Keith and Fortier could not be relied upon to exercise independent judgment, given Arbitrator Fortier's concealment of his ongoing relationship with Norton Rose, and the negative attitude of both Arbitrators

⁴³⁸ Memorial (Curtis), ¶ 158. ↩
⁴³⁹ Memorial (De Jesús), ¶ 95. ↩
⁴⁴⁰ Memorial (De Jesús), ¶ 103, citing Klöckner Annulment Decision, ¶ 95. ↩
⁴⁴¹ Memorial (De Jesús), ¶ 104, referring to Wena Annulment Decision, ¶ 57; Impregilo Annulment Decision, ¶ 165; Eiser Annulment Decision, ¶ 239 quoting EDF Annulment Decision, ¶ 123. ↩

[Page 120]

Keith and Fortier towards Venezuela. The departure is serious because both arbitrators sat and deliberated when deciding on this dispute, including the 2013 Decision.⁴⁴²

399. In its Reply, Venezuela reiterates that if the Committee finds that there was improper constitution, it should also find that there was a serious departure under Article 52(1)(d) when Venezuela was deprived of its fundamental right to be heard by an independent and impartial tribunal.⁴⁴³ Venezuela also argues that under the EDF standard, relied on by the Conoco Parties, the Committee can examine both the allegations that the procedure to determine a challenge was flawed and that the lack of independence of impartiality meant that there was a serious departure.⁴⁴⁴

400. On the second ground, Venezuela argues that Arbitrators Keith's and Fortier's withdrawal of consent to Arbitrator Abi-Saab's resignation deprived Venezuela of its fundamental right to appoint a replacement arbitrator.⁴⁴⁵

401. Arbitrators Keith and Fortier withdrew the plain consent they had already given to arbitrator Abi-Saab's resignation, relying on Convention Article 56(3) and Arbitration Rule 8(2). There has never been a situation where consent to a resignation for imperious health reasons has been withdrawn or refused on the grounds of Convention Article 56(3).⁴⁴⁶

402. Venezuela asserts that the resort to Convention Article 56(3) was improper as it disregarded the grave consequences to Venezuela's fundamental procedural rights. The Travaux Préparatoires show that this provision seeks to prevent a party from frustrating the arbitration and is intended to remove the suspicion that the party may be involved in the resignation of an arbitrator. The Travaux Préparatoires recognize health issues as “good cause” to resign in “good faith.” In the underlying arbitration,

⁴⁴² Memorial (De Jesús), ¶¶ 105, 106. ↩
⁴⁴³ Reply (De Jesús), ¶ 245. ↩
⁴⁴⁴ Reply (De Jesús), ¶ 244. ↩
⁴⁴⁵ Memorial (De Jesús), ¶ 108. ↩
⁴⁴⁶ Memorial (De Jesús), ¶¶ 109, 110. ↩

[Page 121]

the resignation was for serious health issues, known to the Parties and the Tribunal. Therefore, the invocation of Article 56(3) was improper.⁴⁴⁷

403. In addition, Arbitrator Abi-Saab resigned after he submitted his Dissenting Opinion, as anticipated, and coordinated by the Tribunal. Arbitrator Abi-Saab confirmed that there was no deadline for his opinion.⁴⁴⁸ However, when withdrawing their consent and, thereby, triggering Article 56(3), Arbitrators Keith and Fortier explained that the quantum hearing was only seven weeks away and a challenge to one of the arbitrators was pending.⁴⁴⁹

404. Venezuela submits that there was also a departure when the ICSID Secretary-General invited the Parties and the Arbitrators Keith and Fortier to submit observations on the resignation, in circumstances that Venezuela had already informed (three days after the resignation) that it would appoint an arbitrator within 30 days. In Venezuela's view, while the invitation to submit observations was made formally under the cover of Convention Article 56(3) and Arbitration Rule 8(2), in reality it disregarded their content. Nothing in those provisions calls for the ICSID Secretary-General to request for comments from the parties on the resignation.⁴⁵⁰

405. In its Reply, Venezuela submits that Conoco mistakenly relies on Carnegie Minerals. In that case, there was no debate that the right to appoint an arbitrator was a fundamental right and it does not support Conoco's proposition that a “conditional" right loses its “fundamental” quality.⁴⁵¹ Venezuela also rebuts Conoco's argument that by agreeing to the ICSID Convention, Venezuela waived its right to appoint. Such a right is fundamental, established in Convention Article 37(2) and Article 56(3) and is

⁴⁴⁷ Memorial (De Jesús), ¶¶ 113-116. ↩
⁴⁴⁸ Memorial (De Jesús), ¶ 118, referring to A/R-110 [De Jesús] / A/R-69 [Curtis] E-mail from Professor Abi-Saab to the Secretary-General of ICSID, 25 March 2015, (“Abi-Saab email to ICSID"), p. 2. ↩
⁴⁴⁹ Memorial (De Jesús), ¶ 119. ↩
⁴⁵⁰ Memorial (De Jesús), ¶ 120. ↩
⁴⁵¹ Reply (De Jesús), ¶ 250. ↩

[Page 122]

only conditional in exceptional circumstances like collusion or improper conduct, which are absent here.⁴⁵²

406. On the third ground, Venezuela argues that Arbitrators Keith and Fortier could not and should not have decided on the resignation while the proceeding was suspended. It asserts that Arbitrator Fortier was prevented from participating in any respect of the proceedings, which were suspended in accordance with Arbitration Rule 9(6) following the challenge pending against him. Venezuela refers to AS Norvik v. Latvia, where the unchallenged arbitrators noted that they could not entertain a request for provisional measures while the proceeding was suspended by operation of Rule 9(6).⁴⁵³ The breach of Rule 9(6) is in itself a departure, and the participation of Arbitrators Keith and Fortier in the decision on the resignation was a serious departure from a fundamental rule of procedure which warrants annulment pursuant to Convention Article 52(1)(d).⁴⁵⁴

407. In its Reply, Venezuela reiterates that Arbitrators Keith and Fortier should have taken no action until Venezuela's second disqualification proposal against Arbitrator Fortier was resolved.⁴⁵⁵ Venezuela also submits that the issue is not that the arbitrators remained on the tribunal pending the decision on the challenge, but that the truncated tribunal (Arbitrators Fortier and Keith) withdrew their consent to a resignation while the arbitration was suspended. For Venezuela, even if the situation was unprecedented, the Arbitrators did not have the license under the Arbitration Rules to fiddle with the process.⁴⁵⁶

408. Venezuela emphasizes that if the Committee followed the position of Conoco that it should limit review to whether the procedure under the ICSID Convention and Rules

⁴⁵² Reply (De Jesús), ¶ 251. ↩
⁴⁵³ Memorial (De Jesús), ¶ 129, citing A/RLA-56 [De Jesús], AS PNB Banka and others v. Republic of Latvia, ICSID Case No. ARB/17/47, Ruling on Power of Tribunal to Issue Provisional Measures Whilst Proceedings are Suspended, 24 September 2018, ¶¶ 7-8. ↩
⁴⁵⁴ Memorial (De Jesús), ¶¶ 131, 132. ↩
⁴⁵⁵ Reply (De Jesús), ¶ 254. ↩
⁴⁵⁶ Reply (De Jesús), ¶¶ 255, 256. ↩

[Page 123]

has been followed (quad non), the Committee would also find that the violation of Rule 9(6) warrants annulment of the present Award in full.⁴⁵⁷

A.2(3) NO SERIOUS DEPARTURE (CONOCO)

409. In relation to the Chair's decision on the First challenge to the Tribunal majority (related to the reconsideration decisions), Conoco argues that the Chairdid not depart from a fundamental rule of procedure. Conoco asserts that Venezuela, again, simply relies on the same points it makes under Article 52(1)(a); and undertakes no meaningful application of the standard for annulment under Article 52(1)(d) to the facts relating to the challenge to Arbitrators Keith and Fortier. It merely asserts, without support, that any annullable error under Article 52(1)(a) ipso facto constitutes an annullable error under Article 52(1)(d). Thus, Venezuela has failed to prove (i) the existence of a fundamental rule of procedure, and (ii) that Chairdeparted from that fundamental rule of procedure in any serious way.⁴⁵⁸

410. In its Rejoinder, Conoco also rebuts Venezuela's argument that the Chairman's decision on the Second challenge to the Tribunal majority (related to the failure to consent to the resignation) constitutes a ground for annulment under Article 52(1)(d). Conoco submits this argument is indistinguishable from one under Article 52(1)(a) and Venezuela made no effort and cannot satisfy this ground for annulment.⁴⁵⁹

411. Regarding the appointment of Arbitrator Bucher, Conoco argues that his appointment by the Chair is consistent with Convention Article 56(3) and Arbitration Rules 8(2) and 11(2), and that there was no departure (less a serious one) from a fundamental rule of procedure.⁴⁶⁰

412. Venezuela has not shown that there is a “fundamental right to appoint a replacement arbitrator" in general, nor in the ICSID context, where the appointment right is

⁴⁵⁷ Reply (De Jesús), ¶ 258. ↩
⁴⁵⁸ Counter-Memorial (Conoco), ¶¶ 284, 285. ↩
⁴⁵⁹ Rejoinder (Conoco), ¶ 62. ↩
⁴⁶⁰ Counter-Memorial (Conoco), ¶ 286. ↩

[Page 124]

expressly conditional. Convention Article 56(3) makes it clear that there is no fundamental unconditional right to appoint a replacement arbitrator. That provision expressly contemplates situations, such as here, where the right to appoint a replacement arbitrator ceases to exist. In this case, the conditions for Venezuela's right to appoint a replacement arbitrator were not satisfied.⁴⁶¹

413. Conoco refers to the committees' decisions in CDC v. Seychelles and MINE v. Guinea to argue that only rules of natural justice are fundamental, but not all ICSID rules are fundamental for the purposes of Article 52(1)(d).⁴⁶² A party has a fundamental right to a fair proceeding before an independent and impartial adjudicator. Convention Articles 57 and 58 safeguard such fundamental right, and the mechanism those articles provide for was followed in this case.⁴⁶³In its Rejoinder, Conoco reiterates this point, noting that Venezuela did not identify any ICSID case where the appointment of a replacement arbitrator was held to be a fundamental right.⁴⁶⁴

414. The commentaries to which Venezuela refers confirm that the right to appoint an arbitrator is not absolute. The relevant principle of natural justice is the right to an independent and impartial tribunal and there is no dispute that Arbitrator Bucher was independent and impartial. There was no departure, much less a serious one from the fundamental rule of independence and impartiality of the tribunal.⁴⁶⁵

415. On Venezuela's contention that the failure to consent or the withdrawal of consent to Arbitrator's Abi-Saab's resignation was a serious departure, Conoco submits that there is a distinction between the body that decides whether to consent to a resignation, on the one hand, and the body that rules on a proposal to disqualify on the other hand. The proposal to disqualify is decided by the other members of the tribunal (except in cases

⁴⁶¹ Counter-Memorial (Conoco), ¶¶ 344, 345. ↩
⁴⁶² Counter-Memorial (Conoco), ¶¶ 345, 346, citing A/RLA-59 [Curtis] / A/RLA-91 [De Jesús], CDC Group plc v. Republic of the Seychelles, ICSID Case No. ARB/02/14, Decision of the ad hoc Committee on the Application for Annulment of the Republic of Seychelles, 29 June 2005, (“CDC Annulment Decision"), ¶ 49 (internal citations omitted); MINE Annulment Decision, ¶ 5.06 ↩
⁴⁶³ Counter-Memorial (Conoco), ¶ 347. ↩
⁴⁶⁴ Rejoinder (Conoco), ¶¶ 81-85. ↩
⁴⁶⁵ Counter-Memorial (Conoco), ¶ 349. ↩

[Page 125]

referred to the Chair), while the decision whether to consent to a resignation is made by the tribunal which is temporarily truncated. Conoco refers to Schreuer's commentary on that distinction. What follows from this distinction is that in this case, the Tribunal composed of Arbitrators Keith and Fortier continued to function following Arbitrator Abi-Saab's resignation and Arbitrator Fortier remained on that Tribunal pending Venezuela's overlapping proposal to disqualify him.⁴⁶⁶

416. The Tribunal's decision not to consent was not procedurally flawed. Venezuela recognized that Arbitrator Abi-Saab's resignation during the pendency of the second challenge to Arbitrator Fortier created an unprecedented “procedural morass,” not covered by the Convention and the Rules. It therefore is absurd for Venezuela to argue that a procedural question beyond the scope of the Convention and/or the Rules could be a fundamental rule of procedure.⁴⁶⁷

417. Further, even if Arbitrator Fortier's participation in the decision was improper (it was not), it did not prejudice Venezuela, because Arbitrator Keith's withholding of consent to the resignation would have sufficed on its own. Under Convention Article 56(3), failure by the two remaining members to reach agreement would amount to a refusal of consent. Even if the pending challenge against Arbitrator Fortier had disabled him from taking a view on the resignation (which it did not), the result would have been the same, because Arbitrator Keith did not consent.⁴⁶⁸

418. Further, Venezuela's position is impossible and would render Convention Article 56(3) meaningless. Venezuela submits that during the suspension of the proceeding (which resulted from the pending challenge) Venezuela should have appointed a replacement arbitrator, and then the replacement and Arbitrator Keith would decide the challenge. But in that sequence, the Tribunal would never have an opportunity to consent or not consent to the resignation as provided under Convention Article 56. The proceeding would have been suspended for everyone except for Venezuela. Such a result cannot

⁴⁶⁶ Counter-Memorial (Conoco), ¶ 351, citing A/CLA-57, C. Schreuer, The ICSID Convention: A Commentary (2009) (excerpt), p. 1211, ¶ 9. ↩
⁴⁶⁷ Counter-Memorial (Conoco), ¶ 352; Rejoinder (Conoco), ¶ 88. ↩
⁴⁶⁸ Counter-Memorial (Conoco), ¶ 353; Rejoinder (Conoco), ¶ 89. ↩

[Page 126]

be correct because it would entail that every party-appointed arbitrator who resigned during the pending challenge of a different arbitrator would automatically be replaced by the appointing party, thereby rendering Article 56(3) meaningless.⁴⁶⁹

419. Last, the sequence of events caused no prejudice to Venezuela and honoured the ICSID Convention and the Rules. The Convention and the Rules recognize that only the truncated tribunal shall determine consent to an arbitrator's resignation. By contrast, the Convention and the Rules recognize two ways to decide a disqualification proposal: either by the unchallenged co-arbitrators or, in certain circumstances, by the Chair (of the Administrative Council). In the underlying arbitration, the Chair rejected the second challenge to Arbitrator Fortier after the Tribunal decided not to consent to the resignation. Had the Chair first rejected the challenge, and the Tribunal decided not to consent later, the outcome would have been the same. In sum, the result reached in this case honored the governing provisions of the Convention and Arbitration Rules.⁴⁷⁰

A.2(4) THE COMMITTEE'S ANALYSIS OF A SERIOUS DEPARTURE FROM FUNDAMENTAL RULES OF PROCEDURE IN RELATION TO THE APPOINTMENT OF ARBITRATOR BUCHER

420. Having analyzed the standard for annulment on the ground of serious departure from a fundamental rule of procedure (Section VI. Part 2(c)), the Committee will now deal with Venezuela's (Curtis and De Jesús) argument that the appointment of Arbitrator Bucher was a serious departure from a fundamental rule of procedure. The Committee will first address the arguments of Venezuela as represented by Curtis (A.2(4)(1)) and then as represented by De Jesús (A.2(4)(2)), including in each section, where appropriate, references to Conoco's arguments.

A.2(4)(1) SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE AS ARGUED BY VENEZUELA (CURTIS)

421. An unbiased and disinterested adjudicator is one of the pillars of natural justice. The Applicant rightly points to the decision of the ad hoc Committee in Eiser v. Spain, which held that the right to an independent and impartial arbitral tribunal participates

⁴⁶⁹ Counter-Memorial (Conoco), ¶ 354; Rejoinder (Conoco), ¶¶ 90, 91. ↩
⁴⁷⁰ Counter-Memorial (Conoco), ¶ 355; Rejoinder (Conoco), ¶¶ 92, 93. ↩

[Page 127]

in the fundamental exigencies of a fair trial, the integrity of which is protected under Article 52(1)(d).⁴⁷¹ It is also a question of natural justice and due process of which the independence and impartiality of the arbitrator are key facets. This comports with the main Human Rights instruments which, as underlined on many occasions by ad hoc committees, are relevant to the interpretation of the concept of a fundamental rule of law as used in Article 52(1)(d).⁴⁷²

422. We however differ from the Applicant regarding to the categorization of a party's right to participate in the nomination process of the arbitral tribunal, especially the selection of arbitrators, as a fundamental rule of procedure.⁴⁷³ As underlined by Chief Justice Menon, the parties' participation in appointing and constituting the tribunal is the cornerstone of arbitration.⁴⁷⁴ Nevertheless, breaches of the principles governing the formation of the tribunal are sanctioned under Article 52(1)(a). The nature of a fundamental right for arbitration has been recognized in this context,⁴⁷⁵ rather than under Article 52(1)(d) which preserves rules of natural justice.

423. With this reminder of the respective domains of the grievances of Article 52(1)(a) and (d), the Applicant's attack of Mr Fortier and Judge Keith under Article 52(1)(d) fails because of the rejection of its assertions under Article 52(1)(a). Independence and impartiality of both arbitrators are beyond the reach of the attacks that have been mounted. No irregularity affects the appointment process of Prof. Bucher which, as

⁴⁷¹ Memorial (Curtis), ¶ 114, footnote 263, Counter-Memorial (Conoco), ¶ 169: “independence and impartiality of an arbitrator is a fundamental rule of procedure”. Eiser Annulment Decision, ¶ 254; CDC Annulment Decision, ¶ 49; EDF Annulment Decision, ¶ 123. ↩
⁴⁷² Eiser Annulment Decision, ¶¶ 176-178; A/RLA-149 [Curtis], Tulip Real Estate and Development Netherlands B.V. v. Republic of Turkey, ICSID Case No. ARB/11/28, Decision on Annulment, 30 December 2015, (“Tulip Annulment Decision"), ¶¶ 87, 92; A/RLA-154 [Curtis], Churchill Mining Plc and Planet Mining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40), Award, 6 December 2016, ¶ 179. ↩
⁴⁷³ Memorial (Curtis), ¶ 156; Reply (Curtis), ¶ 138. ↩
⁴⁷⁴ A/RLA-88 [Curtis], Sundaresh Menon, Adjudicator, Advocate, or Something in Between? Coming to Terms with the Role of the Party-Appointed Arbitrator, 34(3) JOURNAL OF INTERNATIONAL ARBITRATION 347 (2017). ↩
⁴⁷⁵ Carnegie Annulment Decision, ¶ 126 (“The Committee agrees that in many respects the right to appoint an arbitrator can be described as fundamental and this is recognized by the authorities quoted by The Gambia. Thus, the importance of the right has to be taken into account in deciding the consequences of a party having been deprived of that right"). ↩

[Page 128]

mentioned above, was made in accordance with the ICSID Convention and Rules.⁴⁷⁶ There is no reason for the Committee to intervene.

A.2(4)(2) SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE AS ARGUED BY VENEZUELA (DE JESÚS)

424. The independence and impartiality of the arbitral tribunal is one of the facets of natural justice and due process. The right to an independent and impartial arbitral tribunal is recognized in the decisions of ad hoc committees as participating in the fundamental exigencies of a fair trial, in integrity of which is protected under Article 52(1)(d).⁴⁷⁷ Here, we cannot find that the right to an impartial and independent Tribunal has been violated. The Committee disagrees with Venezuela's appreciation of Mr Fortier and Judge Keith's situation⁴⁷⁸ that they could not be relied upon to exercise an independent and impartial judgment.

425. Independence and impartiality of an arbitrator are, like for any adjudicator, an essential aspect of due process. The parties' right to participate in the selection of arbitrators has been recognized as a fundamental right within the context of the formation of the arbitral tribunal.⁴⁷⁹ Having rejected the Applicant's annulment ground under Article 52(1)(a) regarding Mr Fortier's and Judge Keith's attitude concerning their refusal to consent to Prof. Abi-Saab's resignation, their decision cannot have vitiated the reconstitution of the arbitral tribunal with the nomination of Prof. Bucher or caused any departure from a fundamental rule of procedure. Prof. Bucher was appointed in replacement of Prof. Abi-Saab in accordance with the ICSID Convention and Rules as already remarked.⁴⁸⁰ We add that asking the parties for their comments on the resignation of an arbitrator is, as earlier remarked (see paras. 361, 387), not a breach of the ICSID Rules nor a breach of a fundamental rule of procedure. The frustration of

⁴⁷⁶ See ¶ 364 above. ↩
⁴⁷⁷ Memorial (De Jesús), ¶¶ 103-104; Klöckner Annulment Decision, ¶ 95; Wena Annulment Decision, ¶ 57; Impregilo Annulment Decision, ¶ 165; EDF Annulment Decision, ¶ 123 ; Eiser Annulment Decision, ¶254. Counter-Memorial, (Conoco), ¶ 169: “independence and impartiality of an arbitrator is a fundamental rule of procedure”. ↩
⁴⁷⁸ Memorial (De Jesús), ¶¶ 103-107, Reply (De Jesús), ¶ 240. ↩
⁴⁷⁹ Carnegie Annulment Decision, ¶ 126. Reply (De Jesús), ¶¶ 249-250. ↩
⁴⁸⁰ See ¶ 390 above. ↩

[Page 129]

Venezuela's right to appoint an arbitrator alleged under ICSID Convention Article 56 and Arbitration Rule 6 fails accordingly.⁴⁸¹

426. As we rejected the claim of lack of independence and impartiality, the alleged improper participation of Mr Fortier and Judge Keith in the decision to refuse consent to Prof. Abi-Saab's resignation in breach of ICSID Arbitration Rule 9(6) on suspension of the proceeding during the disqualification of an arbitrator⁴⁸² is no ground for annulment under Article 52(1)(d).

⁴⁸¹ Memorial (De Jesús), ¶¶ 108-124; Reply (De Jesús), ¶¶ 247-252. ↩
⁴⁸² Memorial (De Jesús), ¶¶ 126-132; Reply (De Jesús), ¶¶ 253-259. ↩

[Page 130]

B. GROUNDS RELATED TO THE TRIBUNAL'S EXERCISE OF JURISDICTION: MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS

427. Venezuela (De Jesús and Curtis) invokes two different grounds in relation to the Tribunal's findings on jurisdiction. On the one hand, it invokes the ground of manifest excess of powers under Article 52(1)(b) based on the Tribunal's exercise of jurisdiction over (i) the Conoco Phillips Dutch companies (CPZ, CPH and CGP) and (ii) the indirect investments of CPH and CGP.⁴⁸³On the other hand, it invokes failure to state reasons under Article 52(1)(e) for the Tribunal's findings on jurisdiction for each (i) and (ii).

428. The Committee summarizes the Parties' arguments on the alleged manifest excess of powers and failure to state reasons in relation to the Tribunal's jurisdictional findings regarding the Dutch companies' claims and Treaty Abuse (B.1.) and the indirect investments of CPH and CGP (B.2). Each section starts with the arguments advanced by Venezuela (Curtis) (B.1(1) and B.2(1)); then Venezuela (De Jesús) (B.1(2) and B.2(2)); followed by the Conoco Parties (B.1(3) and B.2(3)). The Committee's analysis of the grounds invoked in relation to the Tribunal's findings on jurisdiction is addressed in Sections B.1(4) (Dutch companies claims and Treaty Abuse) and B.2(4) (indirect investments).

B.1. GROUNDS RELATED TO THE TRIBUNAL'S EXERCISE OF JURISDICTION OVER THE DUTCH COMPANIES AND THE ALLEGED TREATY ABUSE

B.1(1) MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (CURTIS)

MANIFEST EXCESS OF POWERS (CURTIS)

429. Venezuela's position is that the Tribunal manifestly exceeded its powers by asserting jurisdiction under the BIT by giving effect to ConocoPhillips's restructuring strategy made solely to gain ICSID access.⁴⁸⁴

⁴⁸³ Memorial (De Jesús), ¶ 135; Memorial (Curtis), ¶ 762 ↩
⁴⁸⁴ Memorial (Curtis), ¶ 770. ↩

[Page 131]

430. The ConocoPhillips Parties inserted ConocoPhillips Petrozueta B.V. (“CPZ”), ConocoPhillips Hamaca B.V. (“CPH”) and ConocoPhillips Gulf of Paria B.V. (“CGP”), the Dutch companies, into the corporate structure solely to get the BIT's protection and access to ICSID, at a time when legal changes were taking place in Venezuela that affected ConocoPhillips' interests. Venezuela maintains that ConocoPhillips openly acknowledged having created the Dutch companies with that purpose in its Memorial on the Merits⁴⁸⁵ and again in the 2010 Hearing in the testimony of the Conoco Parties' main witness, Mr. Goff.⁴⁸⁶

431. CPZ (with interests in the Petrozuata Project) and CGP (with interests in the Corocoro Project) were registered in the Netherlands on 26 July 2005, and CPH (with interests in the Hamaca Project) was registered on 17 July 2006. None of these companies had any business operations, business of any kind, or employees in the Netherlands.⁴⁸⁷

432. Venezuela recounts the transactions made in 2005 and 2006 to insert CPZ, CGP, and CPH into ConocoPhillips's corporate chain, respectively, into the Petrozuata, Corocoro and Hamaca Projects. Yet, it was not until 31 January 2007 that ConocoPhillips revealed the existence of Dutch companies CPZ, CGP and CPH, which subsequently became Claimants in the arbitration.⁴⁸⁸

433. In Venezuela's view, ConocoPhillips' corporate restructuring constituted treaty abuse and the Tribunal should have dismissed the claims based on the “corporations of convenience.” In its 2013 Decision, the Tribunal recognized it had to prevent the abuse of the investment protection system under the ICSID Convention, so that only investments made in good faith are protected. The Tribunal recounted cases and concluded there was a “growing body of decisions placing some limits on the investor's

⁴⁸⁵ Memorial (Curtis), ¶¶ 762, 763, citing A/R-177 [Curtis] / A/R-166 [De Jesús], Claimants' Memorial on the Merits, dated 15 September 2008, (“Claimants' Memorial on the Merits"), ¶ 216. ↩
⁴⁸⁶ Reply (Curtis), ¶ 421, citing A/R-9 [Curtis] / A/R-50 [De Jesús], Transcript of the Hearing on Jurisdiction, Merits and Quantum held on 31 May to 12 June and 21-23 July 2010, pp. 539-540, 542, 551-552. ↩
⁴⁸⁷ Memorial (Curtis), ¶ 764. ↩
⁴⁸⁸ Memorial (Curtis), ¶ 769, referring to A/C-69 (previously C-36), Letter from Roy Lyons, President of Conoco Phillips Latin America, to Rafael Ramírez, Minister of Popular Power for Energy and Petroleum, and others, 31 January 2007 (“Mr. Lyons letter"). ↩

[Page 132]

choice of corporate form, even if it complies with the relevant technical definition in the treaty text."⁴⁸⁹ In addition, Venezuela submits that the Tribunal noted in the 2013 Decision "that the only business purpose of the restructuring, as acknowledged by Claimants' principal witness on this matter, was to be able to have access to ICSID proceedings."⁴⁹⁰ Thereby, the issue of treaty abuse turns entirely on the foreseeability of the disputes at the time of the restructuring.⁴⁹¹

434. Venezuela recounts several cases of abuse of process and treaty abuse⁴⁹² to conclude that all factors identified in those cases were present also here: the timing of the restructuring (a decade after the Projects were entered and after the dispute had arisen or was foreseeable); no business purpose (sole motivation was to gain ICSID access); without Venezuela's consent (unlike other cases treaty abuse cases, here the host State did not consent and ConocoPhillips did not disclose the existence of the Dutch companies until October 2006); reshuffling of interests within a corporate family to gain ICSID access (there was no bona fide transfer of investments to a third party).⁴⁹³ In its Reply, Venezuela again relies on Phoenix v. Czech Republic to submit that it is well settled that treaty abuse exists when an investment is restructured with the sole purpose of gaining ICSID access when the disputes have arisen or are foreseeable.⁴⁹⁴

435. Venezuela then recounts a series of events in chronological order to show that the expropriation claim was within ConocoPhillips' reasonable contemplation at the time of the restructuring. Venezuela's recounting of the facts starts on 10 October 2004, with Venezuela's suspension of the 1% royalty holiday, and ends with the 2007 January-

⁴⁸⁹ Memorial (Curtis), ¶ 772 and Reply (Curtis), ¶ 418, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 274. ↩
⁴⁹⁰ Reply (Curtis), ¶ 422, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 279. ↩
⁴⁹¹ Reply (Curtis), ¶ 422. ↩
⁴⁹² Memorial (Curtis), ¶¶ 773-788 ↩
⁴⁹³ Memorial (Curtis), ¶ 788. ↩
⁴⁹⁴ Reply (Curtis), ¶ 416, citing R-120 (submitted by De Jesús as A/RLA-88), Phoenix Action Ltd. v. Czech Republic, ICSID Case No. ARB/06/5, ¶¶ 92, 106-107, 113, 143-144. ↩

[Page 133]

June migration and nationalization process, with the restructuring occurring in between.⁴⁹⁵

436. Venezuela concludes that given these events, it is not credible that Conoco did not reasonably foresee the expropriation claim, and the Tribunal's finding of jurisdiction under these circumstances was a manifest excess of powers that warrants annulment.⁴⁹⁶ Venezuela notes that in their Memorial, the Conoco Parties do not dispute any of the facts or evidence on which Venezuela bases its position, Neither do the Conoco Parties dispute the legal principles invoked by Venezuela. The Tribunal's decision on treaty abuse should have been a straightforward application of the law to the undisputed facts.⁴⁹⁷ However, the Tribunal refused to apply the principle of treaty abuse and ignored the foreseeability test.⁴⁹⁸

FAILURE TO STATE REASONS (CURTIS)

437. Venezuela argues that the Tribunal's decision to exercise jurisdiction over the Dutch companies notwithstanding the treaty abuse also suffers from a failure to state reasons.

438. Venezuela submits that the Tribunal concluded that there was no treaty abuse, notwithstanding its finding in the 2013 Decision that ConocoPhillips restructured its investments in 2005 and 2006 with the sole purpose of accessing ICSID arbitration and the Conoco Parties' admissions in relation to the foreseeability of the dispute.⁴⁹⁹

439. Paragraph 279 of the 2013 Decision expressly recognized that the only business purpose of the restructuring, as recognized by the Claimants, was access to ICSID proceedings.⁵⁰⁰ Also, Venezuela maintains, that the Conoco Parties admitted in the arbitration that the disputes were foreseeable, when they acknowledged that (i) by the

⁴⁹⁵ Memorial (Curtis), ¶ 789; Reply (Curtis), ¶ 424. ↩
⁴⁹⁶ Memorial (Curtis), ¶ 790. ↩
⁴⁹⁷ Reply (Curtis), ¶ 419. ↩
⁴⁹⁸ Reply (Curtis), ¶¶ 426, 433. ↩
⁴⁹⁹ Memorial (Curtis), ¶ 792. ↩
⁵⁰⁰ Memorial (Curtis), ¶ 792 and Reply (Curtis), ¶ 435, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 279. ↩

[Page 134]

Summer of 2005 ConocoPhillips concluded that there was a risk that Venezuela would take actions against their investments; (ii) the “patent aggressiveness"⁵⁰¹ of the government revealed a significant risk to the ConocoPhillips investments; and (iii) if the government repealed the Foreign Investment Law the company would be left without forum to pursue claims for expropriation.⁵⁰²

440. The Tribunal's conclusion that there was no abuse of right does not follow from the Tribunal's finding in its 2013 Decision, nor does it follow from the Conoco Parties' admissions in the arbitration. The lack of a cogent explanation constitutes a failure to state reasons under Article 52(1)(e).

441. Venezuela also argues that the 2013 Decision does not deal with the foreseeable nature of the expropriation claim. The Tribunal failed to address the argument that jurisdiction cannot be exercised by a restructuring into a treaty country where the claim is foreseeable. In its Reply, Venezuela submits that the Tribunal in the 2013 Decision only dealt with jurisdiction ratione temporis, and omitted the real issue of treaty abuse which concerns the transfer of ownership when a dispute is foreseeable.⁵⁰³ Also, in the 2013 Decision the Tribunal attached relevance to the Conoco Parties' wish to continue to carry out the projects, yet that fact has nothing to do with the issue of foreseeability of the dispute.⁵⁰⁴ The failure to address that material issue also constitutes a failure to state reasons within the meaning of Article 52(1)(e) and warrants annulment of the Award.⁵⁰⁵

⁵⁰¹ Memorial (Curtis), ¶ 792, citing A/R-183 [Curtis] / A/R-164 [De Jesús], ConocoPhillips Reply on the Merits, dated 2 November 2009, (“Claimants' Reply on Merits”), ¶ 120. ↩
⁵⁰² Memorial (Curtis), ¶ 792, citing A/R-183 [Curtis] / A/R-164 [De Jesús], Claimants' Reply on Merits, ¶ 337; Reply (Curtis), ¶ 427 ↩
⁵⁰³ Reply (Curtis), ¶¶ 434-436, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 278, 279. ↩
⁵⁰⁴ Reply (Curtis), ¶ 437 citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 280; Reply (Curtis), ¶ 438, ↩
⁵⁰⁵ Memorial (Curtis), ¶ 793. ↩

[Page 135]

B.1(2) MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (DE JESÚS)

MANIFEST EXCESS OF POWERS (DE JESÚS)

a) Manifest excess of powers for failure to apply the law, concerning the doctrine of treaty abuse.

442. Undergoing corporate restructuring for the sole purpose of gaining access to ICSID in anticipation of a dispute is treaty abuse.⁵⁰⁶ In the arbitration, Venezuela argued that ConocoPhillips had abusively inserted the Dutch companies in the chain of ownership by creating CPZ, CPH and CGP, solely to gain access to ICSID arbitration at a time when legal changes were taking place in the Venezuelan petroleum industry and when ConocoPhillips foresaw the dispute it later referred to arbitration.⁵⁰⁷

443. Venezuela notes that ConocoPhillips admitted to inserting the Dutch companies solely to gain ICSID access under the BIT.⁵⁰⁸ ConocoPhillips also acknowledged that before the restructuring it had asserted claims against Venezuela in relation to events that were later submitted to the Tribunal as part of the dispute.⁵⁰⁹

444. Pursuant to Article 9(5) of the BIT, “general principles of international law” formed part of the law applicable to the dispute. Venezuela submits that under Article 9(5) the Tribunal was required to apply the doctrine of treaty abuse in international law to resolve the jurisdictional dispute at hand. However, although the Tribunal identified Article 9(5) of the BIT as the primary source of applicable law, it simply listed the law but failed to demonstrate its application. This is the Tribunal's failure to apply the law and constitute a manifest excess of powers.⁵¹⁰

⁵⁰⁶ Memorial (Curtis), ¶ 771. ↩
⁵⁰⁷ Memorial (De Jesús), ¶ 147. ↩
⁵⁰⁸ Memorial (De Jesús), ¶ 149; Reply (De Jesús), ¶ 265. ↩
⁵⁰⁹ Memorial (De Jesús), ¶ 149. ↩
⁵¹⁰ Memorial (De Jesús), ¶¶ 151, 152. ↩

[Page 136]

445. Venezuela characterizes in five steps how, in its view, the Tribunal had manifestly failed to apply the international law on treaty abuse under Article 9(5) of the BIT:⁵¹¹

• First step (paragraphs 268-270 of the 2013 Decision), the Tribunal oversimplified the Parties' positions on treaty abuse.
• Second step (paragraphs 271-274 of the 2013 Decision), the Tribunal made broad statements regarding the standards adopted by other tribunals to conclude at paragraph 274 of the 2013 Decision that there was a “growing body of decisions placing some limits on the investor's choice of corporate form, even if it complies with the relevant technical definition in the treaty."⁵¹²
• Third step (paragraphs 276 and 277 of the 2013 Decision), the Tribunal lists facts starting from 2004, without analysing them or relating them to the broad standards.
• Fourth step (paragraphs 278-280 of the 2013 Decision), the Tribunal made three conclusory statements without linking them to the identified standard.
• Fifth step (paragraph 281 of the 2013 Decision), the Tribunal decided that no treaty abuse had occurred.

446. Venezuela explains that in its five-step approach, the Tribunal did not analyse or determine the rules through which any of the legal standards it identified took concrete form. The Tribunal failed to point to which (if any) of the principles it effectively applied to the present dispute and, thereby, it manifestly exceeded its powers.⁵¹³ Venezuela refers to the decision of the ad hoc committee in Klöckner which annulled the subject award and held that reliance on a principle of law requires “argumentation” and "touching on rules defining how this ‘principle' is to be applied [...] in general and in [a] particular case," rather than postulating the principle.⁵¹⁴

⁵¹¹ Memorial (De Jesús), ¶¶ 153-160. ↩
⁵¹² A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 274. ↩
⁵¹³ Memorial (De Jesús), ¶ 159; Reply (De Jesús), ¶ 268. ↩
⁵¹⁴ Reply (De Jesús), ¶¶ 269-271, citing Klöckner Annulment Decision, ¶¶ 78-79. ↩

[Page 137]

447. Venezuela argues that excess is manifest, and it suffices to read paragraphs 271 to 280 of the 2013 Decision to find the Tribunal's failure to identify the law it purportedly applied. Venezuela counters that Conoco is misrepresenting Venezuela's position that the Tribunal misapplied the law, but Venezuela's argument is that the Tribunal did not identify the law it purportedly applied⁵¹⁵

b) Manifest excess of powers for assuming jurisdiction over the claims of the Dutch companies CPH and CGP

448. The Tribunal also exceeded its powers when it upheld jurisdiction over the ConocoPhillips Dutch companies, CPH and CGP. Conoco abusively included the Dutch companies in the chain of ownership of the projects in 2005-2006, when ConocoPhillips had foreseen the dispute. Venezuela refers to four facts that demonstrate that the 2005-2006 restructurings were abusive, made only to gain access to ICSID in anticipation of the dispute.⁵¹⁶

449. Venezuela submits that to determine if the Tribunal exceeded its powers, the Committee must make an independent interpretation of the jurisdictional sources, the BIT and the ICSID Convention. Here, one factor limiting the Tribunal's jurisdictional powers was the treaty abuse doctrine, which the Tribunal acknowledged in the 2013 Decision. Venezuela refers to a number of ICSID awards to submit that at least four criteria should be considered to assess if there was treaty abuse: (i) the temporality of the restructuring; (ii) the motive for the restructuring; (iii) if the host State consent to the restructuring; and (iv) if the dispute was foreseeable at the time of the restructuring.⁵¹⁷

• The Tribunal failed to address the fact that the restructuring occurred after the investment was made, which was undisputed as reflected in paragraphs 276.a and 276.b of the 2013 Decision.⁵¹⁸

⁵¹⁵ Reply (De Jesús), ¶ 273. ↩
⁵¹⁶ Memorial (De Jesús), ¶¶ 163-165. ↩
⁵¹⁷ Reply (De Jesús), ¶¶ 285-287. ↩
⁵¹⁸ Memorial (De Jesús), ¶ 166. ↩

[Page 138]

• The Tribunal did not address the motives admitted by ConocoPhillips Companies for the restructuring of the chain of ownership, namely, to gain access to ICSID. Instead, the Tribunal focused on the existence of a claim at the time of the restructuring, whereas the dispute was about the foreseeability of such a claim.⁵¹⁹
• The Tribunal did not address the issues of Venezuela never consented to the restructurings, or that Conoco only notified Venezuela of the restructuings after asserting asserted their rights under the BIT.⁵²⁰
• The Tribunal ignored or overlooked facts of the underlying arbitration showing that ConocoPhillips Companies foresaw the dispute at the time of the restructurings:
  • On 13 November 2001, before the restructurings, the Venezuelan Congress enacted the New Organic Law of Hydrocarbons, which provided that private companies were allowed to participate in oil projects in Venezuela only through mixed companies in which the State holds a majority stake (paragraph 188 of the 2013 Decision).⁵²¹
  • On 22 November 2004, before the restructurings, ConocoPhillips Companies asserted claims against Venezuela in relation to the increase of the applicable royalty rate in October 2004 (paragraphs 191, 201, 277.a of the 2013 Decision). ConocoPhillips characterized the increase as “step one of the expropriation.”⁵²²
  • On 12 April 2005, before the restructurings, the Minister of Energy and Mines initiated the migration process concerning the Projects (paragraph 277.a of the 2013 Decision). This, Venezuela argues, means that the Tribunal acknowledged that on that date the process that gave rise to the

⁵¹⁹ Memorial (De Jesús), ¶ 167. ↩
⁵²⁰ Memorial (De Jesús), ¶ 168. ↩
⁵²¹ Memorial (De Jesús), ¶ 170; Reply (De Jesús), ¶ 288. ↩
⁵²² Memorial (De Jesús), ¶ 171, citing A/R-164 [De Jesús] / A/R-183 [Curtis], Claimants' Reply on the Merits, ¶ 336: "[...]. At the time that ConocoPhillips decided to incorporate in The Netherlands, there was no dispute. Venezuela had imposed what would be revealed as 'Step One' of the expropriation – the royalty increase. [...]." Reply (De Jesús), ¶ 289. ↩

[Page 139]

• dispute officially started. In turn, the 2001 New Organic Law of Hydrocarbons already hinted that the migration could result in an amicable migration or mandatory transfer to a mixed company.⁵²³
• The Tribunal acknowledged that there are “limits on the investor's choice of the corporate form, even if it complies with the relevant technical definition in the treaty text,” such as “good faith”, “détournement de pouvoir”, “abuse of rights”, “misuse of the system”, “abuse of powers" and "equality of position” (paragraph 274 of the 2013 Decision).⁵²⁴
• On 31 January 2007, the ConocoPhillips Companies notified Venezuela of the existence of a dispute under investment law, a dispute which they acknowledged had started to emerge in 2004, before the 2005/2006 restructurings.⁵²⁵
• Venezuela emphasized in the arbitration that in May 2005 (before the 2005- 2006 restructurings), counsel for the ConocoPhillips Companies foresaw that the 2001 New Organic Law of Hydrocarbons, the 2004 royalty rate increase, and the migration of the projects towards mixed companies would likely give rise to a dispute that was in fine referred to arbitration. This was publicized in a pamphlet in May 2005.⁵²⁶

450. Venezuela also argues that the excess was manifest because it can be easily perceived from reading the 2013 Decision that the Tribunal acknowledged that: (i) limits must be put to investors's rights to restructuring; and (ii) prior to the 2005/2006 restructurings ConocoPhillips had asserted claims against Venezuela in relation to the dispute that was later referred to arbitration. However, the Tribunal ignored these jurisdictional limits, thereby, manifestly exceeding its powers.⁵²⁷ Contrary to Conoco's submission,

⁵²³ Memorial (De Jesús), ¶ 173. ↩
⁵²⁴ Memorial (De Jesús), ¶ 175, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 274. ↩
⁵²⁵ Reply (De Jesús), ¶ 290. ↩
⁵²⁶ Reply (De Jesús), ¶ 291. ↩
⁵²⁷ Reply (De Jesús), ¶ 294. ↩

[Page 140]

Venezuela maintains that it is not asking the Committee to make a de novo review, but rather to carefully review the applicable jurisdictional sources and make its own assessment of the factual background.⁵²⁸ Venezuela rejects Conoco's proposition that because under Convention Article 41(1) the tribunal's jurisdictional findings are conclusive, excess of powers are not annullable under Article 52(1)(b) of the ICSID Convention. Venezuela submits this would prevent the Committee from performing the first step of the analysis to engage in an independent analysis of the legal and factual sources to determine the applicable limits to the tribunal's jurisdiction.⁵²⁹

451. Venezuela also counters Conoco's argument that as long as a tribunal's jurisdictional findings are tenable, there would be no excess of powers. Venezuela submits that the “tenable test,” entails a degree of review, thereby contradicting Conoco's position that the Committee cannot act as an appellate body. In any event, even applying the “tenable test," Venezuela has shown that no reasonable observer would consider it tenable to rule that the dispute was not foreseeable at the time of 2005/2006 restructurings.⁵³⁰

452. Venezuela argues that the Tribunal ascertained its jurisdiction at odds with the facts it had acknowledged, the applicable jurisdictional sources and logic, and, thereby, manifestly exceeded its powers. This excess, Venezuela submits, warrants that the Committee “annul the passages of the September 2013 Decision dealing with the Arbitral Tribunal's jurisdiction over the ConocoPhillips Dutch Companies under Article 9 of the BIT [and]. Par voie de conséquence, [...] annul, in their entirety, the Interim Decision and the Award. These two decisions cannot stand without a positive finding of jurisdiction over the ConocoPhillips Dutch Companies."⁵³¹

⁵²⁸ Reply (De Jesús), ¶ 296. ↩
⁵²⁹ Reply (De Jesús), ¶ 299. ↩
⁵³⁰ Reply (De Jesús), ¶¶ 300-303. ↩
⁵³¹ Memorial (De Jesús), ¶ 178. ↩

[Page 141]

FAILURE TO STATE REASONS (DE JESÚS)

453. Venezuela also argues that the Tribunal's decision on the issue of treaty abuse does not provide any adequate or sufficient reasons to understand its conclusions.

454. It is not possible to follow points A to B in the Tribunal's reasoning. Venezuela recounts that first, from paragraphs 216 to 218 of the 2013 Decision the Tribunal summarized the Parties' positions on treaty abuse (even though the Parties had devoted over 40 paragraphs to that issue). Second and third, the Tribunal included a catalogue of principles used by other tribunals on the issue of treaty abuse and broadly concludes at paragraph 274 of the 2013 Decision that the catalogue supports the limits placed on investors' choice of corporate form. Venezuela criticizes that despite this catalogue, the Tribunal failed to “explain the legal meaning, scope, application or relevance to the instant case of any of those standards, or even the rules allowing any of them to take concrete form."⁵³²

455. Venezuela identifies the conclusion at paragraph 274 as “Point A” of the Tribunal's reasoning and paragraphs 276 to 281 (a chronology of facts) as “Point B”. At paragraph 275, Venezuela notes that the Tribunal made the "hollow announcement” that it would examine the facts against the standards in the catalogue, yet it failed to do so.⁵³³

456. Then, at paragraphs 278 to280 the Tribunal made three observations:

1. At paragraph 278 the Tribunal stated that the restructuring “did not attempt to transfer any right or claim arising under ICSID or a BIT from one owner to another. Indeed, at the time of the transfers, ConocoPhillips had withdrawn its only claim of breach." The Tribunal's observation at paragraph 278 has no connection to the catalogued standards. The Tribunal failed to explain how the observation at paragraph 278 may be reconciled with the fact that CPH had asserted claims before the Tribunal regarding measures that occurred before its incorporation. The Tribunal ignored the argument posited by Conoco Parties that the expropriation

⁵³² Memorial (De Jesús), ¶ 202; Reply (De Jesús), ¶ 328. ↩
⁵³³ Memorial (De Jesús), ¶¶ 203-205. ↩

[Page 142]

occurred from 2004, i.e., before the restructuring. Finally, it failed to address the issue of foreseeability of the dispute, which was Venezuela's position.⁵³⁴

2. At paragraph 279 the Tribunal stated that “the only business purpose of the restructuring, as acknowledged by the Claimants' principal witness on this matter, was to be able to have access to ICSID proceedings. But [...] no claim had been made at the time of the restructuring [...].” Here, Venezuela argues that the Tribunal again failed to address the issue of the foreseeability of the dispute. Other tribunals in the absence of any business purpose view with scepticism a corporate restructuring; yet the Tribunal failed to address that point too. The Tribunal also ignored key facts, related to the foreseeability of the claim. The Tribunal did not consider the fact that the Ministry of Hydrocarbons had announced to the ConocoPhillips companies that if the migration under the 2011 New Organic Hydrocarbons Law failed, Venezuela would exercise its sovereign powers over its resources. Even the Conoco Parties themselves considered that the expropriation process had started as early as 2004.⁵³⁵
3. At paragraph 280 the Tribunal considered as a “major factor” that the Conoco Parties invested approximately USD 434 million after their decision to restructure. The Tribunal viewed this as indicative of the Conoco Parties wishing to carry out the projects and that proceedings under the BIT were not in prospect at that time. Venezuela submits that the Tribunal failed to explain why this factor would entail an absence of treaty abuse.⁵³⁶

457. Venezuela argues that Conoco takes an unduly restrictive approach towards Article 52(1)(e) when it argues that the Committee has no powers to review the reasoning nor to annul the Award, unless the Award is entirely unreasoned. Venezuela clarifies that its position is not that the Tribunal should have dealt with every argument raised by the Party, that for reasoning to pass the sufficiency test of Convention Article 52(1)(e), the

⁵³⁴ Memorial (De Jesús), ¶¶ 207-209. ↩
⁵³⁵ Memorial (De Jesús), ¶¶ 213-215. ↩
⁵³⁶ Memorial (De Jesús), ¶¶ 216, 217. ↩

[Page 143]

Tribunal must have expressly addressed the arguments that might have an impact on the reasoning, failing which a reader of the 2013 Decision simply cannot understand the Tribunal's reasoning.⁵³⁷ Further, the Tribunal's reasoning was inadequate, by merely finding that Conoco's “evidence it found most persuasive” when it ignored the fact of Conoco's abuse of the corporate structure to secure treaty protection when a dispute was foreseeable.⁵³⁸ Venezuela emphasizes that the Tribunal also failed to indicate how the Freshfields May 2005 pamphlet was irrelevant to their assessment on the issue of treaty abuse.⁵³⁹

458. In light of the above, Venezuela requests the Committee to annul the 2013 Decision dealing with jurisdiction over the Dutch companies, and par voie de consequence the Interim Decision and the Award in accordance with Convention Article 52(1)(e).

B.1(3) NO MANIFEST EXCESS OF POWERS AND NO FAILURE TO STATE REASONS (CONOCO PARTIES)

NO MANIFEST EXCESS OF POWERS (CONOCO)

a) No manifest excess of powers in the Tribunal's findings on treaty abuse

459. Conoco argues that Venezuela is retrying two jurisdictional arguments that the Tribunal unanimously rejected in its 2013 Decision. The Tribunal rejected Venezuela's arguments (i) that the Claimants abused their corporate form and restructured their investments solely to gain access to ICSID arbitration under the BIT; and (ii) that the BIT did not cover indirect investments of CPH and CGP in the Hamaca and Corocoro Project.

460. Conoco recounts the facts related to the restructurings of its investments in Venezuela between July 2005 and September 2006, all of which occurred before the expropriation.⁵⁴⁰

⁵³⁷ Reply (De Jesús), ¶¶ 329, 330. ↩
⁵³⁸ Reply (De Jesús), ¶ 331, citing Counter-Memorial (Conoco), ¶ 760. ↩
⁵³⁹ Reply (De Jesús), ¶ 333. ↩
⁵⁴⁰ Counter-Memorial (Conoco), ¶¶ 736, 737. ↩

[Page 144]

461. According to Conoco, in August 2006 Venezuela sent the proposed terms of the migration of the Association Agreements to mixed companies, and at that point the Claimants did not know that the migration would result in the expropriation. It is Conoco's position that only in January 2007 when Venezuela announced the nationalization program that culminated with the taking of Claimants' investments, Conoco then notified Venezuela of the existence of the dispute. Subsequently on 1 May 2007, Venezuela seized physical control of the projects, and on 26 June 2007, it "formally expropriated Claimants' interests [...] when the negotiation period to reach an agreement on the proposed migration expired."⁵⁴¹

462. In its Counter-Memorial and Rejoinder on Annulment, Conoco describes how the Tribunal reasoned in its 2013 Decision on the issue of treaty abuse:⁵⁴²

• The Tribunal identified Article 9 of the BIT as the applicable law;
• The Tribunal went through the Parties' arguments. The Parties disagreed on whether, at the time of the restructurings, the dispute was foreseeable. Venezuela's position was that the dispute was foreseeable, with Conoco having admitted to restructuring its investments to gain the BIT's protection. The Claimants argued that, at the time of the restructuring, no dispute had arisen or was foreseeable, and nothing prohibits corporations from altering their investment structure to benefit from treaty protections.
• The Tribunal turned to Article 1 of the BIT's jurisdictional requirements and cases referenced by the Parties on treaty abuse. The Tribunal recognized that “a growing body of decisions” support the existing limits to the investor's choice of corporate form, even if it complies with the treaty's definition.
• Then, the Tribunal assessed if the Claimants had abused their corporate form when they brought their BIT claim. The Tribunal looked at the timeline of the

⁵⁴¹ Counter-Memorial (Conoco), ¶ 737. ↩
⁵⁴² Counter-Memorial (Conoco), ¶ 738(a)-(g); Rejoinder (Conoco), ¶ 302. ↩

[Page 145]

• restructurings, including a chronology of regulatory changes that took place between 2004 and 2007.
• The Tribunal found no treaty abuse, because (i) the restructurings in 2005 and 2006 did to transfer any right or claim under the BIT or the ICSID Convention from one owner to another; and (ii) no claim was made and “none was in prospect"⁵⁴³ at the time of the restructurings, even if the Claimants had admitted that their motivation for restricting was to gain BIT protection. The Tribunal referred to Conoco documented expectation that the Projects would continue, having made continued expenditure on the Projects. The Tribunal characterized that continued expenditure as "a very weighty factor in its decision [...]."⁵⁴⁴

463. Conoco argues that Venezuela simply disagrees with the Tribunal's factual and legal conclusions on treaty abuse. Even if Venezuela's criticisms were correct (which they are not), they are not grounds for annulment.⁵⁴⁵

b) No manifest excess of powers in exercising jurisdiction over the Dutch companies CPH and CGP

464. Conoco further argues that the Tribunal identified the applicable law and applied it, which is clear from paragraphs 271 to 280 of the 2013 Decision. Partial non-application or an erroneous application of the law does not constitute grounds for annulment.

465. Conoco also counters Venezuela's argument that the Tribunal failed to apply the law because its legal analysis was not elaborate,⁵⁴⁶ noting that tribunals are not obliged to spell out the connection between each legal principle it identified, nor the conclusion drawn from it.⁵⁴⁷

⁵⁴³ Counter-Memorial (Conoco), ¶ 738(f), citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 278-79. ↩
⁵⁴⁴ Counter-Memorial (Conoco), ¶ 738(g), A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 280. ↩
⁵⁴⁵ Counter-Memorial (Conoco), ¶ 739. ↩
⁵⁴⁶ Counter-Memorial (Conoco), ¶ 742, referring to Memorial (De Jesús), ¶¶ 152, 159. ↩
⁵⁴⁷ Counter-Memorial (Conoco), ¶ 752. ↩

[Page 146]

466. Venezuela, Conoco maintains, is asking the Committee to review de novo the Tribunal's findings on fact and law regarding the treaty abuse issue, which exceeds the scope of annulment review. In the jurisdictional context, an excess of powers must be manifest, obvious on its face and evident from a simple reading of the award, not susceptible to more than one interpretation or tenable so that it can be supported by reasonable arguments.⁵⁴⁸

467. Conoco refers to the decisions of the committee in Azurix, in that the issue of jurisdiction "[...] falls to be resolved definitely by the tribunal in exercise of its power under Article 41 before the award is given, rather than by an ad hoc committee under Article 51(1)(b) after the award has been given.”⁵⁴⁹

468. Conoco refers to the decision of the committee in Mobil, which rejected Venezuela's request to annul the award for manifest excess of powers alleging that the claimant's 2005 restructurings amounted to treaty abuse. The Mobil committee found that it “ha[d] no legitimate power to control the [t]ribunal's specific findings [on jurisdiction] [...] either the legal theory [...] applied in order to distinguish between legitimate corporate planning and abuse of right, or the application of that theory to the particular circumstances of the case.”⁵⁵⁰

469. Conoco also refers to the decisions of the ad hoc committees in Orascom v. Algeria (rejecting manifest excess of powers in declining jurisdiction, concluding that if the committee involves itself in assessing whether the evidence the tribunal gathered justified a finding of abuse of rights, this would transform the committee into an appellate body)⁵⁵¹ and in Alapli v. Turkey (committees are not empowered to review the tribunal's appreciation of the law and determination of relevant facts).⁵⁵²

⁵⁴⁸ Counter-Memorial (Conoco), ¶¶ 744, 750. ↩
⁵⁴⁹ Counter-Memorial (Conoco), ¶ 745, citing Azurix Annulment Decision, ¶ 68. ↩
⁵⁵⁰ Counter-Memorial (Conoco), ¶ 747, citing A/RLA-74 [De Jesús], Venezuela Holdings B.V. and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Decision on Annulment, 9 March 2017, (“Venezuela Holdings Decision on Annulment"), ¶ 115. ↩
⁵⁵¹ Counter-Memorial (Conoco), ¶ 748, citing Orascom Annulment Decision, ¶ 317. ↩
⁵⁵² Counter-Memorial (Conoco), ¶ 749, citing A/RLA-151 [Curtis], Alapli Elektrik B.V. v. Republic of Turkey, ICSID Case No. ARB/08/13, Decision on Annulment, 10 July 2014, (“Alapli Annulment Decision"), ¶ 245. ↩

[Page 147]

470. Furthermore, a tribunal need not address every argument of evidence before it, and Venezuela's claim that the Tribunal manifestly exceeded its powers by not addressing specific points of its case on treaty abuse should fail. It is not the Committee's role to review the Tribunal's factual findings against the record or the parties' arguments. For an inquiry under Article 52(1)(b), it is irrelevant whether the Committee agrees with the Tribunal's conclusions on fact, law, or the Tribunal's appreciation of the evidence.⁵⁵³

471. In its Rejoinder, Conoco reiterates that Venezuela is asking the Committee to make a de novo review of the Tribunal's decisions on jurisdiction, noting that even if there was a mere error (there is not), it would not meet the annulment standard of Convention Article 52(1)(b). Venezuela would have to show that the Tribunal's decision was one that no reasonable person could accept. Despite Venezuela's contention to the contrary, is it not the Committee's role to perform a thorough and independent review of the evidence, the Parties' arguments, or the Tribunal's conclusions. The Committee can only assess whether the decision constitutes an excess of powers that is so obvious on its face as to allow no debate among reasonable persons.⁵⁵⁴

NO FAILURE TO STATE REASONS (CONOCO)

472. Conoco submits that the Tribunal's reasons for upholding jurisdiction were clear and not contradictory. The Tribunal's reasons can be followed from A to B.⁵⁵⁵ The Tribunal's finding of no abuse of right was permissible, because no dispute had commenced and “none was in prospect at the time of the restructurings,” even though the acknowledged business purpose of the restructuring was to access the treaty protections for Dutch investors.⁵⁵⁶

⁵⁵³ Counter-Memorial (Conoco), ¶ 752. ↩
⁵⁵⁴ Rejoinder (Conoco), ¶¶ 300, 301. ↩
⁵⁵⁵ Rejoinder (Conoco), ¶ 303. ↩
⁵⁵⁶ Counter-Memorial (Conoco), ¶ 756, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 279–80. ↩

[Page 148]

473. Contrary to what Venezuela maintains, the Claimants did not admit in the arbitration that the dispute was foreseeable. The issue of the foreseeability of the dispute was key in the arbitration. The Tribunal simply found Venezuela's arguments on that issue unconvincing and Venezuela is not entitled to reopen those findings.⁵⁵⁷

474. There is also no contradiction in the Tribunal's finding that there was no dispute at the time of the restructuring, while also acknowledging that ConocoPhillips had previously withdrawn. Conoco explains that the Parties agreed during the arbitration that the standard for treaty abuse demanded that the specific dispute put before the Tribunal existed or was foreseeable at the time of the restructuring. In its 2013 Decision, the Tribunal noted that in January 2005 ConocoPhillips withdrew its objection to the increased royalty rates approved by Venezuela in October 2004 “in the clearest of terms.” That objection was separate and apart from the specific dispute resolved by the Tribunal relating to the 2007 expropriation.⁵⁵⁸

475. Further, the Tribunal did not fail to state reasons regarding its treatment of Venezuela's arguments on foreseeability. First, as the Orascom committee stated, tribunals are not required to deal with every detail of every argument made by a party.⁵⁵⁹ Second, contrary to Venezuela's assertion, the Tribunal considered the treaty abuse allegation and found that there was no abuse since at the time of the restructuring “no claim had been made" and "none was in prospect".⁵⁶⁰ Third, the Tribunal need not provide reasons for its reasons, and Venezuela's allegation that the Tribunal failed to explain why it considered the continued investment in the Projects as a major factor fails. In any event, the answer is obvious, namely, that no reasonable investor will continue to invest hundreds of millions of dollars long-term if it expects an imminent taking of its investment.⁵⁶¹

⁵⁵⁷ Counter-Memorial (Conoco), ¶ 757. ↩
⁵⁵⁸ Counter-Memorial (Conoco), ¶ 758, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁵⁵⁹ Counter-Memorial (Conoco), ¶ 759, citing Orascom Annulment Decision, ¶ 319. ↩
⁵⁶⁰ Counter-Memorial (Conoco), ¶ 760, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 279. ↩
⁵⁶¹ Counter-Memorial (Conoco), ¶ 769. ↩

[Page 149]

476. In its Rejoinder, Conoco argues that Venezuela attempts, without any support, to reinterpret Article 52(1)(e) to suggest that the Tribunal must at least have addressed any arguments that could impact its reasoning. However, Conoco views this asa step- by-step attempt to resuscitate the arbitration, searching for arguments that Venezuela believes could have had such impact.⁵⁶²

B.1(4) THE COMMITTEE'S ANALYSIS OF THE GROUNDS RELATED TO THE TRIBUNAL'S EXERCISE OF JURISDICTION IN RELATION TO THE DUTCH COMPANIES CLAIMS AND ALLEGED TREATY ABUSE: MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS

B.1(4)(1) THE COMMITTEE'S ANALYSIS OF MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (CURTIS)

MANIFEST EXCESS OF POWERS

477. ConocoPhillips' investment in Venezuela in the 1990s and 2000s was restructured in 2005 and 2006 with the incorporation in the Netherlands of CPZ and CGP on 26July 2005, and CPH on 17 July 2006. The Applicant contends that these companies were corporations of convenience formed for the sole purpose of gaining access to ICSID arbitration under the Treaty. In the Applicant's view, by upholding jurisdiction over the ConocoPhillips Parties under the dispute settlement provisions of Article 9 of the Treaty, the Arbitral Tribunal gave effect to Claimants' strategy and condoned treaty abuse, thereby, manifestly exceeding its powers.⁵⁶³

478. The Arbitral Tribunal discussed the ICSID awards in Aucoven v. Venezuela, Tokios Tokeles v. Ukraine, Aguas del Tunari v. Bolivia, Phoenix v. Czech Republic on which the Applicant notably relies in support of its manifest excess of powers criticism.⁵⁶⁴ The Arbitral Tribunal identified in these awards a “growing body of decisions placing some limits on the investor's choice of corporate form, even if it complies with the relevant technical definition in the treaty text".⁵⁶⁵ The Arbitral Tribunal has not eschewed discussion of legal authority, despite the submission by the Applicant that

⁵⁶² Rejoinder (Conoco), ¶ 304. ↩
⁵⁶³ Memorial (Curtis), ¶¶ 762-769. ↩
⁵⁶⁴ Memorial (Curtis), ¶¶ 773-781. ↩
⁵⁶⁵ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 274. ↩

[Page 150]

the Arbitral Tribunal only paid lip service to the principle that a restructuring of an investment for the sole purpose of gaining access to ICSID constitutes treaty abuse where the transfer is made before a claim arises but when a dispute is foreseeable.⁵⁶⁶

479. The grounds of annulment enumerated in Article 52 make no distinction between issues of jurisdiction and issues on the merits. None is specific to jurisdiction. Ad hoc committees consider jurisdictional questions like any other issue for the purpose of Article 52.⁵⁶⁷ An arbitral tribunal's findings on treaty abuse cannot be reviewed and overruled for errors in fact or law:

“It is not the role of the annulment Committee to review the Tribunal's specific findings on the relevant facts of the case to which the Tribunal applied the concept of abuse of rights. Neither is it the role of the annulment Committee to assess whether the evidence gathered by the Tribunal justify a finding of abuse of rights. This would transform the Committee into an appellate body.”⁵⁶⁸

It is within such context that the Committee examines Venezuela's challenge of jurisdiction.

480. The 2013 Decision already dealt with Venezuela's arguments on treaty abuse. The Applicant proposes a chronology of events starting on 10 October 2014 (with Venezuela's announcement of the royalty increase) which the Tribunal did not accept as sufficiently supporting its contention that the Conoco Parties' expropriation claim was within the reasonable contemplation of the investor at the time of the restructuring.⁵⁶⁹ The Tribunal considered that at the time of the restructuring, "ConocoPhillips had withdrawn its only claim of breach and had done that in the clearest of terms."⁵⁷⁰ The Tribunal then continued: "[i]t was not until May 2006 that

⁵⁶⁶ Reply (Curtis), ¶ 426. ↩
⁵⁶⁷ A/RLA 100 [Curtis], M.C.I. Power Group, L.C. and New Turbine, Inc. v. Republic of Ecuador, Decision on the Application for Annulment, 19 October 2009, (“MCI Annulment Decision"), ¶ 55; Tza Yap Shum Annulment Decision, ¶ 79; Alapli Annulment Decision, ¶ 238; A/RLA-75 [Curtis], Industria Nacional de Alimentos, S.A. and Indalsa Perú, S.A. (formerly Empresas Lucchetti, S.A. and Lucchetti Perú, S.A.) v. Republic of Peru, ICSID Case No. ARB/03/4, Decision on Annulment, 5 September 2007, ¶ 101. ↩
⁵⁶⁸ Orascom Annulment Decision, ¶ 317. See Counter-Memorial (Conoco), ¶ 748. ↩
⁵⁶⁹ Memorial (Curtis), ¶ 789. ↩
⁵⁷⁰ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩

[Page 151]

the first of the actions which were later to be the subject of the letters from ConocoPhillips notifying the Venezuelan government of a dispute, was taken.”⁵⁷¹ The Committee's mission under Article 52(1)(b) is to check the validity of the Award as it was decided by the Arbitral Tribunal. Whether the Arbitral Tribunal's conclusions on the expropriation claim actually “defies credulity”⁵⁷² is an invitation to the Committee to make its own appraisal based on the chain of events presented by the Applicant in its submissions on annulment. It is not within the Committee's remit to reach its own conclusion on jurisdiction on the basis of facts reargued by the Applicant in the annulment proceeding and, in case the Committee would find, as invited by Venezuela, that the expropriation claim was reasonably foreseeable for the investors, conclude that the Tribunal committed a manifest excess of powers.⁵⁷³ If such were our mission, the word "manifest” would only depict the discrepancy between the Committee's own reassessment of the facts in light of the foreseeability test and the assessment made by the Arbitral Tribunal.

481. Venezuela argues that the Arbitral Tribunal applied a wrong test. It ignored the foreseeability test which it earlier acknowledged as germane to treaty abuse and applied instead the test for jurisdiction ratione temporis.⁵⁷⁴ The impugned passages (paragraphs 278-279) of the 2013 Decision which follow the Arbitral Tribunal's recapitulation of the significant events from 10 October 2004 to 26 June 2007, read:

“Against that chronology and bearing in mind the matters weighed by other tribunals considering objections to jurisdiction made on the basis of 'treaty abuse', this Tribunal makes a number of observations. The first is that the transfers of ownership in 2005 and 2006 did not attempt to transfer any right or claim arising under ICSID or a BIT from one owner to another. Indeed, at the time of the transfers, ConocoPhillips had withdrawn its only claim of breach and had done that in the clearest of terms. It was not until May 2006 that the first of the actions, which were later to be the

⁵⁷¹ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁵⁷² Memorial (Curtis), ¶ 790. ↩
⁵⁷³ Reply (Curtis), ¶ 423: “On that issue, it is difficult to understand how the Tribunal could avoid the conclusion that the restructuring was a classic example of treaty abuse. The Tribunal did not deal with the material facts set forth in the table in paragraph 789 of the Memorial, which were not in dispute. One cannot look at that table and come to the conclusion that the migration process initiated by Decree-Law 5.200 was not foreseeable." ↩
⁵⁷⁴ Reply (Curtis), ¶¶ 433, 434, 436. ↩

[Page 152]

subject of the letters from ConocoPhillips notifying the Venezuelan government of a dispute, was taken. The Tribunal later considers the significance of the date of that measure and of 29 August 2006 for the CPH claim.

It is the case, to turn to a second matter, that the only business purpose of the restructuring, as acknowledged by the Claimants' principal witness on this matter, was to be able to have access to ICSID proceedings. But as against that, as already noted, no claim had been made at the time of the restructuring and, subject to the qualification made in respect of the claims by CPH about the two measures taken in 2006, none was in prospect at the times of the restructurings."⁵⁷⁵

482. The Committee considers that the Arbitral Tribunal was not testing temporal jurisdiction in relation to various critical dates such as when the dispute arose, when the investment was made, or the date of the alleged breach. As stated in paragraph 278 of the 2013 Decision,⁵⁷⁶ the Tribunal examined the temporal jurisdiction regarding the CPH claim based on the increase in income tax in respect of the dates of the alleged breach and of the acquisition of ownership interest by CPH.⁵⁷⁷ By claiming that the Arbitral Tribunal should have addressed foreseeability of the income tax claim and the migration process for the associations⁵⁷⁸ the Applicant tries to substitute its own assessment of the circumstances of the foreseeability of the dispute to that of the Tribunal, without demonstrating an excess of powers.

483. The Applicant last alleges⁵⁷⁹ that the fact that the Tribunal attached importance to the ConocoPhillips Parties' continued expenditure on the Projects after the restructurings, which the Tribunal singled out as a “major factor”, does not mean that ConocoPhillips did not foresee disputes coming. The Tribunal took the opposite view by considering ConocoPhillips' continued investment in the project as telling evidence against any finding of treaty abuse.⁵⁸⁰ The Applicant's challenge is an invitation to review the

⁵⁷⁵ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 278-279. ↩
⁵⁷⁶ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278 (“The Tribunal later considers the significance of the date of that measure and of 29 August 2006 for the CPH claim.") ↩
⁵⁷⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 287-289. ↩
⁵⁷⁸ Reply (Curtis), ¶ 436. ↩
⁵⁷⁹ Reply (Curtis), ¶¶ 437, 438. ↩
⁵⁸⁰ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 280. ↩

[Page 153]

application of the foreseeability test undertaken by the Tribunal against the chronology of events adopted in the 2013 Decision in consideration of “the matters weighed by other tribunals considering objections to jurisdiction made on the basis of 'treaty abuse'."⁵⁸¹ The Tribunal's findings of fact are final and immune from review unless there has been a breach of rules of natural justice in the fact-finding process in the arbitration, which is not contended here. The wrongful application of the treaty abuse test argument overlaps with Venezuela's attack on treaty abuse for failure to state reasons which the Committee now examines.

FAILURE TO STATE REASONS

484. The requirement of reasons in ICSID Convention Article 48(3) enables an ad hoc committee to review the award under Article 52(1)(e) as a safeguard against arbitrariness. As stressed by the Wena ad hoc committee, the purpose of Article 52(1)(e) is not to have the award reversed on its merits, it is to allow the parties to understand the arbitrators' decision.⁵⁸²

485. The Applicant contends that, due to a lack of cogent explanations, the Tribunal's conclusion on the absence of treaty abuse does not align with the facts found in the 2013 Decision, the admissions made by the Conoco Parties, or the legal principles relied upon. The Applicant also argues that the Tribunal failed to address the foreseeability of the expropriation claim, asserting that jurisdiction cannot be exercised by virtue of a restructuring into a treaty country when the claim is foreseeable.⁵⁸³

486. The Committee finds that the reasons the Tribunal used to compare the chronology of the ConocoPhillips Companies restructuring with the significant events between October 2004 and June 2007 - and to infer that no claim had been made and none was in prospect at the time of the restructurings- are clear and not contradictory. Furthermore, they are sufficient to explain the conclusion reached by the Arbitral Tribunal on the absence of treaty abuse, without conflating this with jurisdiction ratione

⁵⁸¹ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁵⁸² Wena Annulment Decision, ¶ 83. ↩
⁵⁸³ Memorial (Curtis), ¶¶ 791-793. ↩

[Page 154]

temporis, which concerns the temporal scope of f treaty protection. At paragraphs 278 and 279 of the 2013 Decision, the Tribunal assessed the facts to determine whether the specific dispute put before it already existed or was foreseeable at the time of the restructuring. The Tribunal viewed ConocoPhillips's January 2005 withdrawal of the claim in relation to the 2004 increased royalty rates as a separate dispute, distinguishing from the specific dispute brought before the Tribunal concerning expropriation. This follows from the statement that “[i]t was not until May 2006 that the first of the actions, which were later to be the subject of the letters from ConocoPhillips notifying the Venezuelan government of a dispute, was taken" (emphasis added).⁵⁸⁴

487. On the alleged failure to address the foreseeability of the expropriation claim, the Committee first notes that tribunals are not required to deal with every argument made. However, the Committee considers that this Tribunal addressed the argument. At paragraph 279 of the 2013 Decision, the Tribunal weighed the fact that “no claim had been made at the time of the restructuring and [...] none was in prospect at the times of the restructurings” against the admitted fact that the restructuring's only business purpose was ICSID access.⁵⁸⁵ The Committee's view is that the Tribunal gave sufficient reasons which enable a reasonable reader to understand that the Decision on Jurisdiction was not guided by arbitrariness.

B.1(4)(2) THE COMMITTEE'S ANALYSIS OF MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (DE JESÚS)

MANIFEST EXCESS OF POWERS

a) Regarding the failure to apply the law.

488. With regard to the allegation of treaty abuse by the Dutch companies, the Applicant remarks that the Arbitral Tribunal considered the general principles of international law mentioned at Article 9(5) of the BIT on the law applicable to the dispute as constituting the primary source of law. Yet, it is impossible in the Applicant's view, to detect the

⁵⁸⁴ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁵⁸⁵ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 279. ↩

[Page 155]

actual law, if any, which the Arbitral Tribunal applied to resolve the jurisdictional objection.⁵⁸⁶ To support its contention, the Applicant alleges that the Arbitral Tribunal oversimplified the Parties' position on Treaty abuse at paragraphs 268-270 (first step) before making a broad presentation of the standards adopted by other tribunals to conclude that the treaty abuse doctrine forms part of the applicable international law at paragraphs 271-274 (second step). The Arbitral Tribunal immediately listed the facts at paragraphs 276 and 277 without measuring them against the above broad standards (third step). The Arbitral Tribunal next made three conclusory statements at paragraphs 278-280 without linking them to the standard that it had previously identified (fourth step). Finally, the Arbitral Tribunal decided at paragraph 281 that no treaty abuse had occurred (fifth step). In undertaking this five-step approach, the Arbitral Tribunal failed to analyse or determine the rules through which any of the six broad standards it mentioned take concrete form and the way they operate remained wholly unexplored. In fact, the Arbitral Tribunal failed to point to which (if any) of those principles it effectively applied to the present dispute.⁵⁸⁷

489. Since the first prong of the treaty abuse challenge rests on failure to apply the proper law, it is important for the Committee to first clarify that how a tribunal applies the applicable law is not a matter falling under Article 52(1)(b), which does not allow an appeal on the substantive correctness of the award. It is noteworthy that, the Arbitral Tribunal considered at paragraphs 271-274 the investor-State case decisions and other decisions of international organs discussed by the Parties before drawing the consequences for treaty abuse of the standards identified in these decisions, such as "good faith,” “détournement de pouvoir,” “abuse of treaty right,” “misuse of the system of international investment protection,” “abuse of powers,” and “equality of position."⁵⁸⁸

490. The Arbitral Tribunal also recalled the chronology of the incorporation of the Conoco Dutch companies in 2005-2006 and the chronology of the significant measures adopted

⁵⁸⁶ Memorial (De Jesús), ¶¶ 150-152, 160; Reply (De Jesús), ¶ 272. ↩
⁵⁸⁷ Memorial (De Jesús), ¶ 159. ↩
⁵⁸⁸ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 273. ↩

[Page 156]

by the Venezuelan public powers throughout the years 2004-2007 (at paragraphs 276 and 277). The Tribunal concluded at paragraph 279 that “no claim had been made at the time of the restructuring and, subject to the qualification made in respect of the claims by CPH about the two measures taken in 2006, none was in prospect at the times of the restructurings." It supported its dismissal of the jurisdictional objection by referencing ConocoPhillips' continued investment in the project after the restructuring, which it considered at paragraph 280 as evidence “telling strongly against any finding of treaty abuse.” The Applicant indeed alleges that the Tribunal “erred” in deciding that although the ConocoPhillips companies had withdrawn their reserve regarding some claims prior to the restructurings, the dispute was not foreseeable at the time in 2005-2006.⁵⁸⁹ In essence, the Applicant takes issue with the Tribunal's "close examination"⁵⁹⁰ of all the circumstances of the case in relation to the identified legal standards on treaty abuse. It challenges the application of the proper law to the facts as the Arbitral Tribunal found them, which is wholly distinct from a failure to apply the proper law within the meaning of Article 52(1)(b).

b) Regarding the jurisdiction assumed over the claims of the Dutch companies CPH and CGP

491. The Applicant's second prong of its challenge on treaty abuse is based on usurpation of powers. Reminiscent of its submissions in the arbitration,⁵⁹¹ the Applicant says that the facts acknowledged by the Arbitral Tribunal at paragraphs 188, 191, 201 and 277.a of the 2013 Decision support the conclusion that the ConocoPhillips companies considered the dispute to have emerged as early as in 2004 and that they asserted claims in relation to this dispute well before the restructurings.⁵⁹² The Applicant acknowledges that the Arbitral Tribunal noted at paragraph 277.a of the 2013 Decision withdrawal of the protest regarding the royalty tax increase on 14 January 2005. Notwithstanding the Tribunal's finding that no claim existed or was in prospect at the times of the

⁵⁸⁹ Reply (De Jesús), ¶ 277. ↩
⁵⁹⁰ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 275. ↩
⁵⁹¹ Memorial (De Jesús), ¶¶ 165-169. ↩
⁵⁹² Memorial (De Jesús), ¶¶ 170-177. See also ¶¶ 165-169. ↩

[Page 157]

restructurings,⁵⁹³ the Applicant urges the Committee to consider the withdrawal of a reservation of rights as only affecting one's rights to assert claims in relation to a controversy but not as erasing the factual situation having given rise to the claim which, the Applicant submits, made the dispute foreseeable.⁵⁹⁴ In its view, by acknowledging that the Minister of Energy initiated on 12 April 2005 the migration process (which had been hinted at in the 2001 New Organic Law Hydrocarbons), the Tribunal necessarily acknowledged that on 12 April 2005 the process giving rise to the dispute referred to arbitration, i.e., an unsuccessful migration process, had started.⁵⁹⁵ The Applicant further invites the Committee to interpret ConocoPhillips' notification on 31 January 2007 regarding the existence of a dispute under the Investment Law and the Treaty demonstrating that the ConocoPhillips Parties themselves considered the dispute to had already emerged in 2004.⁵⁹⁶

492. The Committee cannot accept Venezuela's invitation to reassess the facts of the case which escapes its powers under Article 52(1)(b). Arbitration Rule 34(1) provides that the arbitral tribunal is the judge of the admissibility of any evidence adduced and of its probative value. Evaluation of the evidence, thus, falls within the province of the arbitral tribunal.⁵⁹⁷

493. The Applicant's statement that the Committee must perform “a thorough analysis” of all factual and legal aspects of the case⁵⁹⁸ is too ambitious in the context of Article 52(1)(b). A manifest excess of power inquiry focuses on the award motives and dispositive sections which come under the committee's scrutiny, rather than on the underlying dispute, as doing so would turn annulment into an appeal of fact and law. Any de novo review of the case on jurisdiction or on the merits is excluded. The Applicant confused the contours of Article 52 through its invocation of a “reasonable

⁵⁹³ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 279. ↩
⁵⁹⁴ Memorial (De Jesús), ¶ 172, footnote 190. ↩
⁵⁹⁵ Memorial (De Jesús), ¶ 173. ↩
⁵⁹⁶ Memorial (De Jesús), ¶ 171. ↩
⁵⁹⁷ A/CLA-63, Rumeli Telekom A.S. and Telsim Mobil Telekomunikasyon Hizmetleri A.S. v. Republic of Kazakhstan, ICSID Case No. ARB/05/16, Decision on Annulment, 25 March 2010, (“Rumeli Annulment Decision"), ¶ 139. ↩
⁵⁹⁸ Memorial (De Jesús), ¶¶ 140, 144. ↩

[Page 158]

observer” to assess an arbitrator's bias, to review the entire file, particularly a May 2005 Freshfields pamphlet, to prove that the measures implemented in the oil and gas sector since 2001 could give rise to a dispute.⁵⁹⁹ The Committee finds that the Applicant wishes for the Committee to substitute the Applicant's views on the existence of a dispute prior to the incorporation of the Dutch companies for those of the Arbitral Tribunal, without demonstrating an excess of powers. This is impermissible and as such, the Committee needs not address whether the alleged excess was manifest.

FAILURE TO STATE REASONS

494. The Applicant declares that it is impossible to understand with the reasons provided in paragraphs 276-280 of the 2013 Decision which motivated the Arbitral Tribunal's rejection of the jurisdictional challenge concerning the Dutch companies.

495. The Applicant would have liked to read in the 2013 Decision why the Arbitral Tribunal did not share the scepticism of other arbitral tribunals regarding the restructuring chain of ownership in the absence of any business purpose.⁶⁰⁰ It would also like to know why the Tribunal drew its legal findings without assessing whether the Conoco Parties, who considered that the expropriation process began in 2004, were not anticipating the prospect of a dispute in circumstances where the Ministry of Hydrocarbons had officially announced months before the restructuring that the migration process envisaged by the 2001 New Organic Law had been initiated for the Conoco projects and that, unless the migration was successful, Venezuela would exercise its sovereign powers over its resources.⁶⁰¹ It would have liked to see explanations as to why the "major factor" of Conoco' continued investment entailed an absence of treaty abuse.⁶⁰²

⁵⁹⁹ Reply (De Jesús), ¶ 291, see also ¶¶ 294, 303. ↩
⁶⁰⁰ Memorial (De Jesús), ¶ 213. ↩
⁶⁰¹ Memorial (De Jesús), ¶ 215. ↩
⁶⁰² Memorial (De Jesús), ¶ 216. ↩

[Page 159]

496. The Committee recalls, as accepted by other ad hoc committees, that while the arbitral tribunal's reasoning may be terse and the reasons succinctly expressed,⁶⁰³ the Convention does not prescribe for the way in which the reasons are to be expressed in the award. Provided that the parties understand the reasoning,⁶⁰⁴ its persuasiveness escapes review. The Applicant's challenge raises considerations that belong to an appeal procedure and are inadmissible in an annulment review. To illustrate the point, we find that the Applicant's remark⁶⁰⁵ - the Arbitral Tribunal's allegedly isolated finding that the restructurings “did not attempt to transfer any right or claim arising under ICSID or a BIT from one owner to another” from the “circumstances of the case" at paragraph 278- disregards paragraph 275 where the Tribunal expressly sated that the “circumstances of the case" would be examined to determine the existence of treat abuse. The Applicant's remark serves as a direct invitation for the Committee to re- evaluate the consequences attributed by the Arbitral Tribunal to the factual chronology at paragraphs 276-277, particularly, the Arbitral Tribunal's inference that there was neither an actual nor a prospective dispute at the times of the restructurings, based on the fact that ConocoPhillips Companies withdrew their October 2004 protest regarding the royalty tax increase on 14 January 2005.⁶⁰⁶

497. The contradiction raised by the Applicant between the fact that the transfers of ownership according to the Tribunal “did not attempt to transfer any right or claim arising under ICSID or a BIT”⁶⁰⁷ and the fact that CPH has asserted claims in the arbitration regarding measures that had occurred prior to its incorporation⁶⁰⁸ confuses the issue of treaty abuse with that of temporal jurisdiction of the CPH claims examined

⁶⁰³ A/CLA-95 / A/RLA-189 [Curtis], Churchill Mining Plc and Planet Mining Pty Ltd v. Republic of Indonesia, ICSID Case No. ARB/12/14 and 12/40, Decision on Annulment, 18 March 2019, (“Churchill Annulment Decision”), ¶ 254. ↩
⁶⁰⁴ Wena Annulment Decision, ¶¶ 75-83, 79-80. ↩
⁶⁰⁵ Memorial (De Jesús), ¶ 212. ↩
⁶⁰⁶ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 277 “a. 10 October 2004: the royalty rate increase announced on Venezuelan television, which was protested by letter from ConocoPhillips on 22 November 2004, following which the protest was withdrawn on 14 January 2005." ↩
⁶⁰⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁶⁰⁸ Memorial (De Jesús), ¶ 209. ↩

[Page 160]

in other sections of the 2013 Decision.⁶⁰⁹ The Applicant further contends that there is a contradiction between stating at paragraph 278 that a claim was made (although it had been withdrawn) prior to the restructurings and stating at paragraph 279 that no "claim was made [...] prior to the restructurings.”⁶¹⁰ The Committee disagrees. The reasoning of the above paragraphs enables the reader to understand the Tribunal's motives. The ConocoPhillips Companies protested in November 2004 against the royalty tax increase announced but withdrew their protest in January 2005, before the restructuring process began. The inescapable conclusion is that at that time no claim existed. As the ad hoc Committee in Wena clarified, “reasons may be implicit in the considerations and conclusions contained in the award, provided they can be reasonably inferred from the terms used in the decision.”⁶¹¹

498. The reproach made against the Arbitral Tribunal for drawing its legal findings on treaty abuse without assessing the key facts of the case -specifically, the announcement made by the Minister of Hydrocarbons months before the restructurings that the Republic would exercise its sovereign powers over its resources unless the migration process announced in 2001 was successful, is an inadmissible criticism of the Tribunal's assessment of evidence.⁶¹² The assertion that the Tribunal failed to consider the restructurings with scepticism, as other tribunals have done⁶¹³ also constitutes an impermissible review of how the Tribunal assessed the facts and concluded that no contentious situation existed or was in prospect at the time of the restructuring.⁶¹⁴

⁶⁰⁹ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 289: “While the income tax increase was enacted before CPH was inserted into the chain of ownership in the following month, September 2006, the increase did not come into effect until 1 January 2007. Which date is decisive? The date of the enactment of the law providing for the increase or the date it took effect in the law? In principle, the Tribunal considers that a breach of obligation does not occur until the law in issue is actually applied in breach of that obligation and that cannot happen before the law in question is in force. In this particular context the relevant date was 1 January 2007, some months after CPH acquired its ownership interest." ↩
⁶¹⁰ Memorial (De Jesús), ¶ 214 and footnote 219. ↩
⁶¹¹ Wena Annulment Decision, ¶ 81. ↩
⁶¹² Memorial (De Jesús), ¶ 215. ↩
⁶¹³ Memorial (De Jesús), ¶ 213. ↩
⁶¹⁴ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 274, 279. ↩

[Page 161]

499. Arbitration Rule 34 entrusts the arbitral tribunal as the sole judge of the probative value of evidence; unless essential to resolve the question at issue, tribunals are not required to provide reasons on each piece of evidence which is not relied upon by them. The Applicant raises the letter of ConocoPhillips Latin America President regarding the occurrence of the expropriation process which came out in 2004.⁶¹⁵ The dispute notification letter of 31 January 2007 has a subtitle reading “Beginning In 2004, The Venezuelan Government Adopted A Series Of Measures That Severely Impaired ConocoPhillips' Investments In Venezuela And Frustrated Its Legitimate Expectations In Respect Of These Investments.” The only 2004 event which is mentioned is the October 2004 increase of the royalty payment followed by the indication that “ConocoPhillips agreed to waive its right to contest this action in January 2005 in good faith [...]"⁶¹⁶ That event was also mentioned by the Tribunal in its chronology of events at paragraph 277.a and the omission of the letter itself could not affect the Tribunal's reasoning. The Tribunal inferred from Conoco's waiver the inexistence of any dispute at the times of the restructurings: “Indeed, at the time of transfers, ConocoPhillips had withdrawn its only claim of breach and had done that in the clearest terms.”⁶¹⁷ In the same vein, the Applicant argues that the Tribunal failed to explain how the May 2005 Freshfield pamphlet was not relevant in assessing whether the dispute described in that document was foreseeable following the release of the brochure "Venezuela: Proposed Measures Against Oil and Gas Investors."⁶¹⁸ It was incumbent upon Venezuela to bring to the Tribunal's attention the allegedly decisive nature of the Freshfield's four pages communication leaflet⁶¹⁹ in relation to Conoco's decision to restructure its investment to circumvent the Treaty's jurisdictional clause. It is not the Committee's task to determine the relevance of the evidence produced in the arbitration as that would turn the Committee into an appellate body.

⁶¹⁵ Memorial (De Jesús), ¶ 210. A/C-69 (previously C-36), Mr. Lyons letter (footnote 217). ↩
⁶¹⁶ A/C-69 (previously C-36), Mr. Lyons letter. ↩
⁶¹⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 278. ↩
⁶¹⁸ Reply (De Jesús), ¶ 333. ↩
⁶¹⁹ R-14, Freshfields Bruckhaus Deringer, Venezuela: Proposed Measures Against Oil And Gas Investors (May 2005). ↩

[Page 162]

500. The Applicant denounces the imbalance between paragraphs 216, 217 and 218 which recapitulate the Parties' respective positions on jurisdiction over the Dutch companies and the forty paragraphs in the Parties' submissions dedicated to this jurisdictional objection. The Applicant alleges this imbalance as an indication that the Arbitral Tribunal preferred to follow its preconceived view and infers that the Majority's “conclusory postulations make evident a lack of legal reasons.”⁶²⁰ The Applicant further alleges a lack of connection between the Tribunal's jurisdictional finding and the catalogued standards at paragraphs 272 and 273 for detection of treaty abuse identified in ICSID and other international cases. Although the Tribunal recognized the limits on the investor's choice of corporate form at paragraph 274, the Applicant argues that the Tribunal failed to make further reference to any of the standards. Instead, it only presented a chronology of events, followed by three observations: firstly, at paragraph 278, that the restructurings “did not attempt to transfer any right or claim arising under ICSID or a BIT from one owner to another;" secondly, at paragraph 279, the absence of business purpose was irrelevant because “no claim had been made at the time of the restructurings” and “none was in prospect;" thirdly, at paragraph 280, the “major factor” consisting of Conoco's wish to continue carrying out the projects entails an absence of treaty abuse.⁶²¹ The Applicant considers that the reader's inability to follow the reasoning results from the Tribunal's failure to explain the meaning of the “good faith,” “détournement de pouvoirs,” “abuse of treaty rights,” “misuse of the system,” “abuse of powers,” and “equality of position,” standards, making it impossible to understand why these standards were considered relevant or whether they were applied at all in the Tribunal's reasoning.⁶²²

501. The Committee's reading is that the Tribunal first recounted at paragraphs 272-273 the decisions which recognized the concepts in relation to the misuse of law. It then added at paragraph 274 the equality of position between the parties as an additional factor to

⁶²⁰ Memorial (De Jesús), ¶ 200. ↩
⁶²¹ Memorial (De Jesús), ¶¶ 203-204. ↩
⁶²² Memorial (De Jesús), ¶ 202; Reply (De Jesús), ¶ 328. ↩

[Page 163]

determine whether the doctrine of abuse should be invoked in the actions of a corporate body like the Conoco companies. The Tribunal then declared at paragraph 275:

"Whether those limits have been breached must turn on a close examination of all of the circumstances of the case, circumstances to which the parties in this arbitration have given particular attention. The Tribunal now turns to that examination. It will do that bearing in mind how rarely courts and tribunals have held that a good faith or other related standard is breached. The standard is a high one."⁶²³

502. Venezuela argues that at this juncture such close examination was not performed by the Arbitral Tribunal,⁶²⁴ an argument this Committee has earlier dispelled given it constitutes an attempt to re-evaluate the Tribunal's judgment on evidence. The Arbitral Tribunal summarized the Parties' respective contentions, referred to the relevant legal principles and applied the relevant legal authorities. The Tribunal's reasoning on the absence of treaty abuse begins in paragraph 275 and reads without difficulty: the circumstances of the restructuring and the events which preceded the submission of the Request for Arbitration are detailed at paragraphs 276-277, and are contextualised with the legal principles of treaty abuse. This ultimately enables the Tribunal to conclude at paragaphs 278-279 that no claim existed or was in prospect at the time of the restructurings.

503. For the Tribunal, the existence of Conoco's substantial investment after the restructuring further demonstrates that Conoco's intention was not to abuse the ICSID Process. As the ConocoPhillips Parties remark,⁶²⁵ an investor would have disengaged if a contentious situation had existed. Having drawn the limits of an investor's choice of corporate form and found that in the present case, these had not been exceeded, the Arbitral Tribunal explained to the Parties how and why it rejected Venezuela's jurisdictional objection considering the facts of the case and the applicable law on treaty abuse.

⁶²³ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 275. ↩
⁶²⁴ Memorial (De Jesús), ¶ 205. ↩
⁶²⁵ Counter-Memorial (Conoco), ¶ 761. ↩

[Page 164]

B.2 GROUNDS RELATED TO THE TRIBUNAL'S EXERCISE OF JURISDICTION OVER INDIRECT INVESTMENTS

B.2(1) MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS IN RELATIONΝ ΤΟ THE TRIBUNAL'S JURISDICTIONAL FINDINGS ON THE INDIRECT INVESTMENTS AS ARGUED BY VENEZUELA (CURTIS)

MANIFEST EXCESS OF POWERS (CURTIS)

504. Venezuela notes that the BIT does not cover indirect investments, as such the Tribunal manifestly exceeded its powers when exercising jurisdiction over the indirect investments of CHP and CGP.

505. The BIT's Article 1(a) defined “investment” as “every kind of asset” and enumerates five categories within its scope. In its 2013 Decision, the Tribunal found that the BIT covered indirect investments because the BIT's definition of "investment" is written in broad terms and is “clear beyond question.” Venezuela argues that the breadth of the definition only goes to the type of assets covered, not how the assets are held. The logical interpretation of “investment” is that it covers assets of foreign nationals asserting a claim against a Contracting Party, not assets indirectly owned or controlled through subsidiaries of that national.⁶²⁶

506. The Tribunal erroneously assumed that there was no difference between a treaty expressly covering “direct or indirect” investments, as many treaties do, and one that does not. However, when Venezuela and the Netherlands intended to grant treaty protection to indirect investments, they did so expressly in the relevant instrument. Other treaties they entered into explicitly refer to “direct or indirect” investments (for example, Venezuela's bilateral investment treaties with Canada, Paraguay, France and Belgium-Luxembourg, or the Netherlands's bilateral investment treaties with Hong Kong, Kuwait and Tunisia).⁶²⁷

507. Venezuela argues that the BIT's Contracting Parties were conscious of the need to incorporate the concept of indirectness when they wanted to depart from the normal

⁶²⁶ Memorial (Curtis), ¶ 798. ↩
⁶²⁷ Memorial (Curtis), ¶ 797. ↩

[Page 165]

meaning of terms used, but they did so only with respect to the term “national” in Article 1(b)(iii). Under that provision Dutch nationals can structure their investments through an entity owned or controlled by them even in other countries, but the entity bringing the claim must still be the direct owner of the investment.⁶²⁸

508. The Tribunal ignored the distinction between investment treaties expressly covering direct or indirect investments and those, such as the BIT, that do not, thereby, violating the principle "verba aliquid operari debent” as a canon of treaty interpretation. The Tribunal's interpretation was illogical, given the fact that the same countries negotiated other treaties expressly referring to “indirect” investments, and it could not have simply assumed that the same country intends the same result in other treaties which omit such specific language.⁶²⁹Venezuela then refers to scholars who have recognized the significance of the presence or absence of language expressly incorporating the concept of indirect investment.⁶³⁰

509. Venezuela also asserts that the Tribunal failed to deal with the issue that the BIT establishes that the obligations of a Contracting Party run to nationals of the other Contracting Party only with respect to their investments located in the territory of the first Contracting Party. Venezuela refers to the BIT's recitals, to Articles 2, 4 and 7, all of which, refer to investments made in the territory of the other Contracting Party. This, Venezuela submits, indicates that the BIT protects entities having an investment in Venezuela, and not their various parent companies holding interests in entities in other countries.⁶³¹

510. Venezuela argues that by considering that the Treaty was to be interpreted as if the words "directly or indirectly” were included in Article 1(a), the Tribunal rewrote the BIT to expand its scope.⁶³²

⁶²⁸ Memorial (Curtis), ¶ 798; Reply (Curtis), ¶ 444. ↩
⁶²⁹ Memorial (Curtis), ¶ 800; Reply (Curtis), ¶ 447. ↩
⁶³⁰ See Memorial (Curtis), ¶ 801. ↩
⁶³¹ Memorial (Curtis), ¶ 803. ↩
⁶³² Memorial (Curtis), ¶ 805. ↩

[Page 166]

511. Further, the Tribunal wrongly relied on Fedax v. Venezuela, stating that it supported the "plain meaning” of Article 1 of the Treaty advocated by the Conoco Parties when the comment of the Fedax tribunal was related to the issue whether the type of asset constituted an investment, whereas here the issue is whether the purported investor owned the investment at issue.⁶³³

FAILURE TO STATE REASONS (CURTIS)

512. Venezuela argues that the reasoning of the Tribunal with respect to the protection of indirect investments under the BIT cannot be followed “from point A. to point B." Venezuela asserts that the Tribunal concluded, without any analysis, that “the words of the definition [of Article 1] are clear beyond question" and there was “no need to interpret" the provision. It offered no explanation why absent the words “directly or indirectly," Article 1 also afforded protection to indirect investments, when the literal and logical interpretation of the term “investment” is that it only covers assets owned directly by persons falling within the definition of the term “nationals.” In that exercise, the Tribunal did not meaningfully take into consideration Venezuela's and the Netherlands' treaty practice.⁶³⁴

513. In addition, the Tribunal failed to address Venezuela's argument that the BIT's broad definition of “investment” was merely relevant to the rights or assets afforded protection, but not to the way such rights or assets are held (i.e., directly or indirectly). This was a fundamental point omitted by the Tribunal, which constitutes a failure to state reasons within the meaning of Article 52(1)(e) of the ICSID Convention, an additional ground to annul the Award with respect to the claims of CPH and CGP.⁶³⁵

⁶³³ Memorial (Curtis), ¶ 806; Reply (Curtis), ¶ 448. ↩
⁶³⁴ Memorial (Curtis), ¶ 809, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 285; Reply (Curtis), ¶ 449. ↩
⁶³⁵ Memorial (Curtis), ¶ 810; Reply (Curtis), ¶ 449. ↩

[Page 167]

B.2(2) MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS IN RELATION ΤΟ THE TRIBUNAL'S JURISDICTIONAL FINDINGS ON THE INDIRECT INVESTMENTS AS ARGUED BY VENEZUELA (DE JESÚS)

MANIFEST EXCESS OF POWERS (DE JESÚS)

514. Venezuela argues that the Tribunal manifestly exceeded its powers when (a) it failed to apply the applicable law and (b) usurped powers it did not have over the direct investments.⁶³⁶

a) Regarding the failure to apply the law

515. Venezuela argues that the Tribunal failed to perform any form of interpretation of the BIT's relevant terms when it found that the BIT covered indirect investments by CPH and CGP in the Hamaca and Corocoro Projects.

516. Venezuela notes that the indirect nature of the investments was undisputed. Also, each Party made submissions on the interpretation of the relevant terms of the BIT under Article 31 of the Vienna Convention on the Law of the Treaties (“VLCT”), which, Venezuela submits, was the applicable law for the interpretation of the BIT. Yet, the Tribunal failed to apply the VCLT, or any other law, to address Venezuela's jurisdictional objection regarding the indirect nature of the investments of CPG and CGP.⁶³⁷

517. Venezuela submits that in its 2013 Decision, the Tribunal based its findings concerning CPH and CGP's indirect investments relying exclusively on "the words of Vattel,"⁶³⁸ which were not submitted by the Parties into the record, and which do not constitute "principles of international law,” applicable to resolve the dispute under Article 9(5) of the BIT.

⁶³⁶ Reply (De Jesús), ¶ 308. ↩
⁶³⁷ Memorial (De Jesús), ¶¶ 184-187; Reply (De Jesús), ¶¶ 309, 310. ↩
⁶³⁸ Memorial (De Jesús), ¶ 188, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 285. ↩

[Page 168]

518. In its Reply, Venezuela counters that the “tenability" test proposed by Conoco is misplaced. The relevant question is not if other tribunals, applying other rules of law to other facts have also considered indirect investments as qualifying for protection under the applicable instrument. The issue is whether the Tribunal applied the applicable law to resolve the jurisdictional issue in the arbitration. Venezuela emphasizes that its position is not that the Tribunal misapplied the applicable law to the issue of jurisdiction, but that it failed to apply the applicable law at all. Also, Conoco's argument that the Tribunal identified that BIT Articles 1 and 9 should apply to the jurisdiction challenge fails, since applying the law requires more than just pointing to the law. Finally, Venezuela submits that Conoco's defense that the Tribunal applied the VCLT by referring to Fedax is misplaced. In Fedax, although the tribunal mentioned the VCLT to discuss the meaning of “investment” under ICSID Convention Article 25, the term “investment” was purportedly construed by the tribunal under Article I of the relevant Treaty.⁶³⁹

b) Regarding the usurpation of powers

519. Venezuela also argues that the Tribunal manifestly exceeded its powers when it concluded that the BIT covered indirect investments of CPH and CGP. Venezuela's position was that (a) the BIT only covered investments “located in the territory" of Venezuela. In this regard, Venezuela pointed to the BIT's preamble, and Articles 2, 4 and 7; and (b) the BIT's exclusion of indirect investments was consistent with the BIT's own purpose and object, since “no substantive benefit is achieved by permitting companies to utilize layers of holding companies to manufacture multiple claimants making duplicative claims for alleged treaty violations.”⁶⁴⁰

520. On the issue of the BIT not covering indirect investments, Venezuela "incorporate[d] by reference" the submissions from its Memorial on Objections to Jurisdiction

⁶³⁹ Reply (De Jesús), ¶¶ 311-316. ↩
⁶⁴⁰ Memorial (De Jesús), ¶ 191, citing A/R-49 [De Jesús] / A/R-8 [Curtis], Respondent's Rejoinder on the Merits, 1 February 2010, (“Respondent's Rejoinder”), ¶ 140; Reply (De Jesús), ¶ 320. ↩

[Page 169]

(paragraphs 172-181).⁶⁴¹For example, among those arguments, Venezuela submitted that although the term “investment” in Article 1(a) of the BIT was broad and encompasses “every kind of asset,” unlike other treaties executed by Venezuela and the Netherlands, it did not cover assets owned or controlled “directly or indirectly" by a national of the other Contracting Party. Venezuela explained that the omission was meaningful considering that Venezuela's treaties with Canada, Paraguay, France, and Belgium-Luxembourg, all of which explicitly cover investments in Venezuela held indirectly by a national of those countries.⁶⁴²

521. Venezuela maintains that the Tribunal completely failed to engage with its arguments and to apply the BIT's definition of investment, to the extent that there is no reasoning at all on the issue.⁶⁴³ Venezuela counters Conoco in that it is not asking the Committee to make a de novo review, which as explained supra (paragraph 457) it is a restrictive position on the Committee's power to review the Tribunal's findings.⁶⁴⁴

522. Therefore, Venezuela asks that the Committee annul the passages of the 2013 Decision dealing with CPH and CGP's indirect investments and the claims related to the same pursuant to Article 52(1)(b) of the ICSID Convention. Par voie de conséquence, it requests that the Committee also annul the passages of the Interim Decision and the Award dealing with claims related to CPH and CGP's indirect investments.⁶⁴⁵

FAILURE TO STATE REASONS (DE JESÚS)

523. The Tribunal did not provide any reason to the interpretation of the BIT. It dealt with the matter in five paragraphs (282-286) in the 2013 Decision, and did not address Venezuela's objection on the issue of indirect investments of CPH and CGP. Venezuela's objection was based on the interpretation of the ordinary meaning of the

⁶⁴¹ Memorial (De Jesús), ¶ 192, referring to A/R-47] / A/R-6 [Curtis], Respondent's Memorial on Objections to Jurisdiction, 1 December 2008, (“Respondent's Memorial on Jurisdiction"), ¶¶ 172-181. ↩
⁶⁴² A/R-47 [De Jesús] / A/R-6 [Curtis], Respondent's Memorial on Jurisdiction, ¶ 174. ↩
⁶⁴³ Memorial (De Jesús), ¶ 192; Reply (De Jesús), ¶ 321 ↩
⁶⁴⁴ Reply (De Jesús), ¶¶ 322, 323. ↩
⁶⁴⁵ Memorial (De Jesús), ¶ 194. ↩

[Page 170]

terms of the BIT in the context and in light of the BIT's object and purpose in accordance with the VCLT.⁶⁴⁶

524. The Tribunal only made a conclusory statement that “for the Tribunal the words of the definition are clear beyond question" which falls short of satisfying the Tribunal's obligation to provide reasons under Convention Article 43(1).⁶⁴⁷This, Venezuela argues, warrants an annulment of the 2013 Decision of the portion dealing with CPH's and CGP's indirect investments and the portions dealing with their indirect investments in the Interim Decision and the Award.⁶⁴⁸

525. In its Reply, Venezuela counters that Conoco Parties tries to construct reasons to attribute to the Arbitral Tribunal by suggesting that the Tribunal's reference to Fedax was sufficient since in that case the tribunal undertook the interpretation that was required from the Tribunal.⁶⁴⁹ Venezuela submits that Convention Article 52(1)(e) requires that a statement of reasons must have some substance to enable parties' comprehension; mere references to other cases, without any form of argumentation do not amount to stating reasons. On this point, Venezuela refers to the decision of the ad hoc committee in Klöckner⁶⁵⁰ and the dissenting opinion to the majority award issued in Watkins v. Spain.⁶⁵¹

B.2(3) NO MANIFEST EXCESS OF POWERS AND NO FAILURE TO STATE REASONS REGARDING THE TRIBUNAL'S JURISDICTIONAL FINDINGS ON INDIRECT INVESTMENTS (CONOCO PARTIES)

NO MANIFEST EXCESS OF POWERS (CONOCO)

526. Conoco maintains that Venezuela again tries to appeal the Tribunal's findings in jurisdiction. In the arbitration, the Tribunal rejected Venezuela's jurisdictional

⁶⁴⁶ Memorial (De Jesús), ¶ 219; Reply (De Jesús), ¶ 336. ↩
⁶⁴⁷ Memorial (De Jesús), ¶ 220; Reply (De Jesús), ¶ 336. ↩
⁶⁴⁸ Memorial (De Jesús), ¶ 222. ↩
⁶⁴⁹ Reply (De Jesús), ¶ 337. ↩
⁶⁵⁰ Reply (De Jesús), ¶ 339, citing Klöckner Annulment Decision, ¶ 119. ↩
⁶⁵¹ Reply (De Jesús), ¶ 338, citing A/RLA-89 [De Jesús], Watkins Holdings S.à r.l. and others v. Kingdom of Spain, ICSID Case No. ARB/15/44, Dissent on Liability and Quantum of Prof. Dr. Hélène Ruiz Fabri, 9 January 2020, ¶ 4. ↩

[Page 171]

objection that the BIT did not offer protection to indirect investments, like those of CPH and CGP, since Article 1 of the treaty omitted any reference to indirect investments, unlike other treaties concluded by Venezuela and the Netherlands. For Venezuela argues that by extending the BIT's protection to indirect investments, the Tribunal disregards the BIT's ordinary meaning, considering its object and purpose.⁶⁵²

527. Conoco explains that both CPH and CGP were indirect investors in the Hamaca and Corocoro Projects. CPH held 57% of shares in Hamaca Holding LLC, which in turn was the sole shareholder of Phillips Petroleum Company Venezuela Ltd., which in turn held 40% interest in the Hamaca Project. CGP was since August 2005 the sole shareholder of Conoco Venezuela C.A., which in turn held 32.2075% interest in the Corocoro Project.⁶⁵³

528. Conoco describes the Tribunal's analysis of Venezuela's argument. The Tribunal started by noting that treaty drafting practice varies, and went on to consider Venezuela's argument that some Dutch treaties covered indirect investments, yet noted that the model Dutch treaty contained language identical to Article 1 of the BIT. The Tribunal considered Fedax v. Venezuela as the case “directly on point” and supported the Claimants' position of the plain meaning of Article 1 (“every kind of asset”). For the Tribunal, the language used in the definition of investment in Article 1 of the BIT was clearly written in broad terms and beyond question, and that there was no need to interpret when such a need did not exist.⁶⁵⁴

529. Conoco argues that Venezuela is retrying its case on jurisdiction, and that Venezuela's allegations that the Tribunal failed to apply the applicable law and sufficiently address Venezuela's arguments are meritless. Conoco adds that Venezuela's request to

⁶⁵² Counter-Memorial (Conoco), ¶ 765. ↩
⁶⁵³ Counter-Memorial (Conoco), ¶ 764. ↩
⁶⁵⁴ Counter-Memorial (Conoco), ¶ 766, referring to and citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 284, 285. ↩

[Page 172]

incorporate its submissions on jurisdiction from the arbitration is improper and impermissible in annulment proceedings.⁶⁵⁵

530. In Conoco's view, the Tribunal identified the Treaty as the law applying to jurisdictional objection, in particular, BIT's Articles 1 and 9. Then, the Tribunal interpreted the term “investment “ of Article 1 in accordance with the plain meaning of the words of Article 1, and agreed with Claimants' argument and the reasoning of the Fedax tribunal that the broad term “every kind of asset” covers every kind of asset, including indirect investments.

531. On the interpretation under the VCLT, Conoco submits that even if Venezuela's allegation (that the Tribunal failed to apply the VCLT to interpret Article 1 of the BIT) was true, it would not amount to an annullable ground; it would be at most an error made when interpreting and applying the applicable law, i.e., the BIT.⁶⁵⁶

532. Conoco's position is that the Tribunal's reference to the decision of the Fedax tribunal shows that the Tribunal did not ignore the VCLT, accepted the reasoning of the Fedax tribunal and applied that reasoning to the case: the Fedax tribunal interpreted the same treaty language in accordance with the VCLT and in light of treaty practice in the Netherlands and in Venezuela. In this regard, Conoco relies on the decision of the committee in Impregilo that [...] “[s]tating that [the tribunal] has no ground to disagree with decisions in another case means that the [t]ribunal accepted the reasoning in those decisions and applied that to the specific case submitted to it.”⁶⁵⁷

533. Conoco asserts that Venezuela's real complaint is that the Tribunal did not cite the VCLT; yet the Tribunal's reasoning was faithful to the VCLT, since it interpreted the BIT in accordance with the ordinary meaning given to its terms, consistent with Article 31(1) VCLT.⁶⁵⁸

⁶⁵⁵ Counter-Memorial (Conoco), ¶ 769. ↩
⁶⁵⁶ Counter-Memorial (Conoco), ¶ 771. ↩
⁶⁵⁷ Counter-Memorial (Conoco), ¶ 772, citing Impregilo Annulment Decision, ¶ 201. ↩
⁶⁵⁸ Counter-Memorial (Conoco), ¶ 773. ↩

[Page 173]

534. Also, Venezuela's objection that the Tribunal erred in assuming there is no difference between a treaty that covers “direct or indirect” investment and one that does not, is an objection that has no place in annulment. In any event, as long as the Tribunal's decision is tenable and reasonable arguments can be made, the decision must stand.⁶⁵⁹

535. In its Rejoinder, Conoco reiterates that Venezuela is rearguing its case on jurisdiction, which has no place in annulment. At most, Venezuela has alleged an error in the interpretation or application of law, which cannot lead to annulment. Also, Venezuela's contention that the Tribunal ignored certain of its arguments is irrelevant. The Tribunal considered the Parties' thoroughly and found Venezuela's arguments unconvincing.⁶⁶⁰

NO FAILURE TO STATE REASONS (CONOCO)

536. Venezuela (De Jesús) asserts that the Tribunal provided no reasons to its decision on the meaning of the term “investment;” while Venezuela (Curtis) accepts that there were reasons but asserts that those were unclear. Conoco submits that Venezuela's real claim is neither that the Tribunal failed to state reasons, nor that those were unintelligible, but rather that the Tribunal adopted the wrong reasons, which is not a basis for annulment.⁶⁶¹

537. The Tribunal provided reasons for finding that the BIT protected indirect investments, interpreting the BIT's definition of “investments" in line with treaty practice and in accordance with the plain meaning of the words in the Treaty. The Tribunal also referenced the case law cited by the parties, and relied on a decision it found relevant, which in turn concluded that the same BIT protected indirect investments on the basis of (i) the plain meaning of the definition of “investment;” (ii) the VCLT; (iii) the treaty practice of both the Netherlands and Venezuela; and (iv) the World Bank guidelines on foreign investment.⁶⁶²

⁶⁵⁹ Counter-Memorial (Conoco), ¶ 775. ↩
⁶⁶⁰ Rejoinder (Conoco), ¶¶ 306, 307. ↩
⁶⁶¹ Counter-Memorial (Conoco), ¶ 777; Rejoinder (Conoco), ¶ 308. ↩
⁶⁶² Counter-Memorial (Conoco), ¶ 778; Rejoinder (Conoco), ¶ 308. ↩

[Page 174]

538. As for the sufficiency of that reasoning, the issue before the Tribunal was whether Article 1 of BIT, which was silent on the point, covered indirect investments. The Tribunal provided reasons for concluding that it did and among other reasons given, the Tribunal relied on Fedax, which in turn recognized “that every time the Republic of Venezuela has wished to exclude [from investment treaties] investments that are not manifestly direct, it has done so in unequivocal terms.”⁶⁶³ In its Rejoinder, Conoco notes that Venezuela (Curtis) takes issue with the Tribunal's reliance on Fedax, which at most is an (incorrect) allegation of error in application of the law. And while Venezuela's (De Jesús) critiques that the Tribunal's reference to Fedax lacks any substance, the Tribunal provided reasons which are intelligible and can be followed.⁶⁶⁴

539. Conoco also submits that, contrary to Venezuela's allegation, the Tribunal did note both Venezuela's view on treaty practice and its argument as to the relevance of treaties containing express provisions on indirect investments. But the Tribunal was not persuaded by these arguments; that is not a ground for annulment.⁶⁶⁵ Similarly, Conoco counters that Venezuela may disagree with the Tribunal's reference to the Dutch model treaty on the issue of indirect investments, but disagreeing with the reasons is not a failure to state reasons.⁶⁶⁶

540. Conoco also counters Venezuela's argument that the Tribunal failed to address the argument that Article 1's breadth is relevant only to the type of rights or assets that could constitute an investment, and not the way (directly or indirectly) they were held, explaining that the Tribunal is not required to explicitly address all points raised by the parties. The fact that the Tribunal was not convinced by Venezuela's arguments is not a reason to annul the decision.⁶⁶⁷

⁶⁶³ Counter-Memorial (Conoco), ¶ 779, citing A/CLA-40, Fedax N.V. v. Republic of Venezuela, ICSID Case No. ARB/96/3, Decision of the Tribunal on Objections to Jurisdiction, 11 July 1997, (“Fedax Decision on Jurisdiction"), ¶ 36. ↩
⁶⁶⁴ Rejoinder (Conoco), ¶ 309. ↩
⁶⁶⁵ Counter-Memorial (Conoco), ¶ 780. ↩
⁶⁶⁶ Rejoinder (Conoco), ¶ 310. ↩
⁶⁶⁷ Counter-Memorial (Conoco), ¶ 781. ↩

[Page 175]

541. In sum, the Tribunal provided reasons for its findings on the issue of indirect investment and those reasons are sufficient to discharge the Tribunal's limited duty under Convention Article 48(3) to provide reasons. Venezuela has not demonstrated that the Tribunal failed to state reasons, and its request for annulment should be dismissed.⁶⁶⁸

⁶⁶⁸ Counter-Memorial (Conoco), ¶ 782. ↩

[Page 176]

B.2(4) THE COMMITTEE'S ANALYSIS OF THE GROUNDS RELATED TO THE EXERCISE OF JURISDICTION REGARDING INDIRECT INVESTMENTS: MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS

B.2(4)(1) THE COMMITTEE'S ANALYSIS OF MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (CURTIS)

MANIFEST EXCESS OF POWERS

542. Venezuela disputes that the Tribunal exceeded its powers by exercising its jurisdiction over the indirect interests of CPH and CGP in the Hamaca and Corocoro Projects, despite the Treaty not covering indirect investments. The Applicant remarks that, unlike other treaties entered by Venezuela and the Netherlands, the definition at Article 1(a) of the Treaty does not refer to direct or indirect investment ownership or control. However, the Arbitral Tribunal did not analyse the effect of these different formulations or the treaty practice of both Venezuela and the Netherlands, nor did it take into account the principle "verba aliquid operari debent” as a canon of interpretation. The Arbitral Tribunal therefore rewrote the Treaty to expand its scope.⁶⁶⁹

543. Here lies the answer of the Arbitral Tribunal on the indirect investments of CPH and CGP:

“The Tribunal remarks in respect of treaty practice that this demonstrates that there is no single way of drafting definitions. Different formulations may have precisely the same effect. Drafting practice varies. While, as the Respondent notes, some of the Dutch bilateral investment treaties use a different formula, its model bilateral investment treaty, along with very many others, uses exactly the wording to be found in the treaty with Venezuela. The one case which is directly in point — Fedax — also supports the Claimants' 'plain meaning'.

For the Tribunal the words of the definition are clear beyond question. They are written in broad terms, as indeed the Respondent accepts. In the words of Vattel, there is no need to interpret that which has no need of interpretation.

⁶⁶⁹ Memorial (Curtis), ¶¶ 804, 805. ↩

[Page 177]

Accordingly, this objection to jurisdiction in respect of the claims of CPH and CGP fails."⁶⁷⁰

544. The application of interpretative rules was not in issue as the Arbitral Tribunal found that there was no need for interpretation of Article 1: “In the words of Vattel, there is no need to interpret that which has no need of interpretation.” Venezuela's contention is that the Arbitral Tribunal, quite to the contrary, should have engaged in an interpretative exercise of the Treaty scope. The underlying idea of Vattel's general maxim may be understood as holding interpretation a secondary process which only comes into play when it is impossible to make sense of the plain meaning of the treaty. As the Tribunal accepted the “plain meaning” of Article 1 of the Treaty which defines investment “as every kind of assets,” it rejected Venezuela's interpretation in support of the exclusion of indirect investments without committing an excess of powers.

545. The Applicant also takes issue with the Tribunal's use of the Fedax v. Venezuela Decision on Objections to Jurisdiction as addressing limits on the type of the assets which is not the issue here.⁶⁷¹ This criticism alludes to an error of law which is not reviewable and does not amount to a manifest excess of powers.

FAILURE TO STATE REASONS

546. The Committee's conclusion on manifest excess of powers also entails the rejection of the Applicant's argument that the Arbitral Tribunal's determination with respect to Article 1(a) lacks reasons.

547. Absent any necessity to interpret the Treaty, the Arbitral Tribunal had no obligation to explain beyond an iteration of the Treaty's terms why indirect investments could be protected by the Treaty. As remarked by the ad hoc Committee in Hydro v. Albania,⁶⁷² there is no need for tribunals to express reasons for reasons. The Treaty words which

⁶⁷⁰ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 284-286. ↩
⁶⁷¹ Fedax Decision on Jurisdiction, ¶ 32. “This definition [of investment at Article 1(a)] evidences that the Contracting parties to the [Kingdom of the Netherlands and Republic of Venezuela] Agreement intended a very broad meaning for the term 'investment”'. Memorial (Curtis), ¶ 806; Reply (Curtis), ¶ 448. ↩
⁶⁷² A/CLA-114, Hydro S.r.l. and others v. Republic of Albania, ICSID Case No. ARB/15/28, Decision on Annulment, 2 April 2021, (“Hydro Annulment Decision"), ¶ 126. ↩

[Page 178]

define a protected investment as every kind of investment without distinction constitute ipse dixit the Tribunal's reasoning of the inclusion of indirect investments. This answers the Applicant's concerns that the Tribunal did not explain why indirect investments could be protected in the absence of the words “directly or indirectly," given that the Applicant believes that a logical interpretation of the term “investment” only covers assets directly owned by nationals.⁶⁷³

548. An arbitral tribunal has no obligation to address all points raised by the parties,⁶⁷⁴ especially where, as here, where the conclusion by the Arbitral Tribunal on the broadest definition of “investment” in the Treaty rendered unnecessary Venezuela's argument that the broad definition pertains to only the rights or assets that are afforded protection, not as to the manner in which such rights or assets are held.⁶⁷⁵

B.2(4)(2) THE COMMITTEE'S ANALYSIS OF MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS AS ARGUED BY VENEZUELA (DE JESÚS)

MANIFEST EXCESS OF POWERS

549. The Committee comes now to Venezuela' second jurisdictional challenge concerning the indirect investments of CPH and CGP. The Applicant challenges at first the Tribunal's refusal to perform any interpretation of the Treaty relevant terms, postulating instead that such interpretation was not necessary because the terms were clear. According to the Applicant, this constituted a manifest excess of powers by failure to apply any law because the Tribunal was required to construe the terms of the treaty in accordance with the rules of interpretation embedded in the VCLT which qualify as general principles of law in the terms of Article 9(5) of the Treaty.⁶⁷⁶

550. The Committee finds beyond contestation that the Tribunal's decision was not omission or neglect but a conscious choice not to engage in an interpretative exercise

⁶⁷³ Memorial (Curtis), ¶ 809. ↩
⁶⁷⁴ Rumeli Annulment Decision, ¶ 84; MCI Annulment Decision, ¶ 67. ↩
⁶⁷⁵ Memorial (Curtis), ¶¶ 809-810. ↩
⁶⁷⁶ Memorial (De Jesús), ¶¶ 185-187; Reply (De Jesús), ¶¶ 309-310. ↩

[Page 179]

beyond the plain terms of the Treaty. The Arbitral Tribunal's 2013 Decision explains “there is no need to interpret that which has no need of interpretation.”⁶⁷⁷

551. Article 9(5) of the Treaty is a choice of law clause which includes “the general principles of international law" in conjunction with the Treaty.⁶⁷⁸ The VCLT reflects international customary law which was confused by the Applicant with the general principles of international law. It is not the Committee's task to rewrite the challenge, but we may observe that the Tribunal applied the Treaty's clear and precise terms, specifically Article 1(a) of the Treaty which reads “the term ‘investments' shall comprise every kind of asset.” A literal interpretation following which every kind of asset means direct and indirect investments in the absence of precision is a plausible explanation of what the Tribunal has reached. This is not how Venezuela understood as the ordinary meaning of the Treaty words. However, neither the failure of the Tribunal to follow the Applicant's proposed approach, nor the Applicant's claim of an inappropriate reference at paragraph 284 to the Fedax award⁶⁷⁹ constitute an egregious misapplication of the applicable law or a non-application of any law, as Venezuela would suggest.⁶⁸⁰

552. Venezuela next grounds the challenge on the Tribunal's refusal to engage with its arguments in the arbitration on the exclusion of indirect investments. It pleaded in the arbitration that only investments located in the territory of Venezuela are covered by the Treaty and that exclusion of indirect investments is consistent with the purpose and object of the Treaty because “no substantive benefit is achieved by permitting companies to utilize layers of holding companies to manufacture multiple claimants making duplicative claims for alleged treaty violations."⁶⁸¹ In support of its

⁶⁷⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 285. ↩
⁶⁷⁸ Article 9(5) reads: “5. The arbitral award shall be based on: ↩
- the law of the Contracting Party concerned;
- the provisions of this Agreement and other relevant Agreements between the Contacting Parties;
- the provisions of special agreements relating to the investments;
- the general principles of international law; and
- such rules of law as may be agreed by the parties to the dispute."
⁶⁷⁹ Reply (De Jesús), ¶ 316. ↩
⁶⁸⁰ Reply (De Jesús), ¶ 313. ↩
⁶⁸¹ A/R-49 [De Jesús] / A/R-8 [Curtis], Respondent's Rejoinder, ¶ 140 cited in Memorial (De Jesús), ¶ 191. ↩

[Page 180]

demonstration, the Applicant “incorporates by reference its previous submissions on this specific issue”.⁶⁸² However, submissions made by the Applicant during the arbitration proceeding cannot be re-submitted to the Committee as if it were an appeal board.⁶⁸³ By presenting before the Committee the arguments that were unsuccessful in the arbitration, the Applicant's criticisms are indeed an indirect attack against the reasons of the Decision, which forms the basis for Venezuela's next ground for annulment. According to Venezuela, the “mere reading” of the paragraphs on the indirect investments demonstrate that a usurpation of powers⁶⁸⁴ occurred.

FAILURE TO STATE REASONS

553. The Applicant finally denounces the brevity of the reasoning which rejects Venezuela's jurisdictional objection over CPH and CGP's indirect investments as a failure to provide any reasons on the interpretation of the Treaty and failure to explain the conclusory statement that “[f]or the Tribunal the words of the definition are clear beyond question.”⁶⁸⁵

554. The Committee considers that the Tribunal did not deem necessary to interpret because the definition of investment was clear under the Treaty. Parties are entitled to be informed why they have won or lost, but arbitrators are not required to express reasons for their reasons.⁶⁸⁶ There was no obligation to go beyond an iteration of the Treaty terms of “every kind of investment” in the definition of a protected investment. The Tribunal provided at paragraphs 284-285 reasons regarding the inclusion of indirect investments which are accessible to reasonably intelligent people. Having noted that the Dutch model BIT uses the same terms as the Dutch-Venezuela Treaty despite different formulations in Dutch drafting practices, and having emphasized that Venezuela consistently uses unequivocal terms to exclude indirect investments,⁶⁸⁷ the

⁶⁸² Memorial (De Jesús), ¶ 192. ↩
⁶⁸³ See Counter-Memorial (Conoco) ¶ 769. ↩
⁶⁸⁴ Reply (De Jesús), ¶ 321. ↩
⁶⁸⁵ Memorial (De Jesús), ¶¶ 219-220. ↩
⁶⁸⁶ Hydro Annulment Decision, ¶ 126. ↩
⁶⁸⁷ Fedax Decision on Jurisdiction, ¶ 36. ↩

[Page 181]

Tribunal dismissed the jurisdictional objection on the grounds that Article 1 of the Treaty does not make any express distinction between direct and indirect investments. The Tribunal decision is therefore easily understood.

[Page 182]

C. GROUNDS RELATED TO THE TRIBUNAL'S FINDINGS IN RESPECT OF ARTICLE 6 OF THE TREATY: MANIFEST EXCESS OF POWERS; SERIOUS DEPARTURE; AND FAILURE TO STATE REASONS

C.1. THE PARTIES' POSITIONS ON THE TRIBUNAL'S FINDINGS UNDER ARTICLE 6 OF THE TREATY

555. In its 2013 Decision, the Tribunal Majority concluded that Venezuela “[...] breached its obligation to negotiate in good faith for compensation for its taking of the ConocoPhillips assets in the three projects on the basis of market value as required by Article 6(c) of the BIT, and that the date of the valuation is the date of the Award.”⁶⁸⁸ Venezuela, unsuccessfully, requested three times that the Tribunal reconsider the 2013 Decision.

556. On 17 January 2017, a reconstituted Tribunal issued its Interim Decision, where it rejected Venezuela's third request for reconsideration and clarified what it considered to be the “true meaning of the 2013 Decision.”⁶⁸⁹ The Tribunal stated that "[b]ased on the above analysis of the 2013 Decision, the conclusion is that the Tribunal did not find a lack of good faith on the part of the Respondent for its breach of an obligation to negotiate on the basis of market value as required by Article 6(c) of the BIT. The Tribunal stated simply that the Respondent failed to be involved in negotiations leading to an offer complying with the requirements of 'just compensation' and ‘market value.”’⁶⁹⁰ The Tribunal thus declared that "[...] Venezuela has breached Article 6 of the BIT by unlawfully expropriating the Claimants' investments in the three Projects in the Orinoco Belt in Venezuela.”⁶⁹¹

557. Venezuela (Curtis and De Jesús) submits, that the Tribunal manifestly exceeded its powers (Article 52(1)(b)) and seriously departed from a fundamental rule of procedure

⁶⁸⁸ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 401. ↩
⁶⁸⁹ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, 17 January 2017, (“Interim Decision”), ¶¶ 39-66. ↩
⁶⁹⁰ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶ 60. ↩
⁶⁹¹ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶ 156(3). ↩

[Page 183]

(Article 52(1)(d)) by finding that Venezuela had failed to negotiate in good faith; also, it failed to state the reasons for its findings (Article 52(1)(e)).

558. The Committee summarizes the Parties' arguments on the grounds invoked. Each section starts with the arguments advanced by Venezuela (Curtis) (C.1(1)); then Venezuela (De Jesús) (C.1(2)) and finally, the Conoco Parties (C.1(3)). The Committee's analysis of the grounds invoked in relation to the Tribunal's findings in respect of Article 6 of the BIT is addressed in C.1(4)(1) (Curtis) and C.1(4)(2) (De Jesús).

C.1(1) THE TRIBUNAL'S FINDINGS UNDER ARTICLE 6 OF THE TREATY AS ARGUED BY VENEZUELA (CURTIS)

MANIFEST EXCESS OF POWERS

559. Venezuela (Curtis) argues that the Tribunal Majority manifestly exceeded its powers when (i) it found that Venezuela had failed to negotiate in good faith and that, thereby, the expropriation was unlawful; (ii) it disregarded the BIT's provisions and any customary international law principles applicable for the valuation date; and (iii) it disregarded the Parties' agreement on the applicable legal principles on the valuation date.

560. For Venezuela, the finding that the expropriation was unlawful for failure to negotiate in good faith for compensation, results from a failure to apply the applicable law. Venezuela refers, among others, to the dissenting opinions of Prof. Abi-Saab and arbitrator Bucher. Both arbitrators considered that the Conoco Parties never had advanced the issue of good faith negotiations.⁶⁹²

561. Once the Tribunal unanimously held that the expropriation was carried out in accordance with due process of law and did not violate undertakings to the Conoco Parties, the Majority's finding of illegality in the expropriation had no basis. The only missing element in the expropriation was compensation, and yet (i) Venezuela always

⁶⁹² Memorial (Curtis), ¶ 590. ↩

[Page 184]

acknowledged that the Conoco Parties were entitled to compensation; (ii) Venezuela made substantial compensation offers; and (iii) it is accepted that a disagreement over the compensation does not render an expropriation unlawful.⁶⁹³ Therefore, the argument that the expropriation was unlawful due to failure to agree on the compensation cannot be taken seriously, and the Tribunal's decision on this point is tantamount to a manifest excess of powers due to failure to apply the applicable law.⁶⁹⁴

562. Venezuela submits, contrary to Conoco's position, that it is not asking the Committee to review the Award like an appeal.⁶⁹⁵ Also, Venezuela counters Conoco's argument, submitting that an egregious error of law can amount to failure to apply the law. Venezuela refers to the annulment decision in Mobil, which focused on the failure of the tribunal to consider the compensation provisions of the Cerro Negro project. Venezuela notes that while it may be true that different tribunals assessing different facts may come to different conclusions, the Mobil case is practically identical to the present case.⁶⁹⁶

563. The Tribunal Majority also manifestly exceeded its powers by fixing the date of the Award as the valuation date and, thereby, disregarding the applicable law on the issue of the valuation date. The Tribunal disregarded Article 6(c) of the BIT, which provides that the valuation date should be determined as of a time immediately prior to the expropriation. It also disregarded Article 9(3), which limits the Tribunal's jurisdiction to awarding anything other than damages for a breach of the BIT.⁶⁹⁷

564. The Tribunal disregarded Article 9(3) because designating the date of the Award as the valuation date, rather than the date of the expropriation, led to an excess of compensation for the alleged treaty breach. Such decision had no basis in the BIT or in any customary international law. Even if customary international law applied, the Tribunal had failed to apply the applicable principle of customary international law.

⁶⁹³ Memorial (Curtis), ¶¶ 591, 594. ↩
⁶⁹⁴ Memorial (Curtis), ¶ 595. ↩
⁶⁹⁵ Reply (Curtis), ¶ 271. ↩
⁶⁹⁶ Reply (Curtis), ¶¶ 273-275. ↩
⁶⁹⁷ Memorial (Curtis), ¶ 597; Reply (Curtis), ¶ 279. ↩

[Page 185]

Under Chorzów Factory where the only wrongful act is the failure to pay compensation and the expropriation is lawful in other respects, the date of dispossession serves as the valuation date.⁶⁹⁸ Conoco submits that Article 9(3) does not prevent a tribunal from awarding other damages, such as those under customary international law. However, as Venezuela submits, nothing in customary international law (including the Chorzów Factory case), or any other law allows a tribunal to award double, triple, or quadruple or more damages beyond the principal amount due.⁶⁹⁹

565. The Tribunal recognized Chorzów Factory as setting forth the applicable principles of customary international law and the Conoco Parties relied on that case for the purposes of the valuation date. Both parties cited many cases showing that the damage caused by failure to pay compensation is awarding interest from the date of expropriation to the date of payment of the compensation. Yet, the Tribunal failed to cite a single case involving an expropriation where the only wrongful act was the failure to pay compensation, and the valuation date was moved.⁷⁰⁰

566. Finally, the Tribunal Majority and later the reconstituted Tribunal exceeded their powers by disregarding the Parties' agreement reached in the 2010 Hearing on the legal difference between expropriation unlawful per se and unlawful sub modo (i.e., only for failure to pay compensation). In a case of expropriation sub modo, compensation must be measured as of the date of expropriation, with interest due until the date of payment.⁷⁰¹ In its Reply, Venezuela submits that Conoco tries to limit the scope of the Tribunal's discussion to situations of expropriations unlawful per se and the "full reparation" standard of Chorzów Factory; yet the Tribunal's discussion in the Award is not so limited. According to Venezuela, the Tribunal adopted a market value concept when compensation is not paid on the date of expropriation, even if the expropriation was lawful, without specifying any authority supporting its position.⁷⁰²

⁶⁹⁸ Memorial (Curtis), ¶¶ 600- 603; Reply (Curtis), ¶ 278. ↩
⁶⁹⁹ Reply (Curtis), ¶ 279. ↩
⁷⁰⁰ Memorial (Curtis), ¶¶ 603-607. ↩
⁷⁰¹ Memorial (Curtis), ¶ 609. ↩
⁷⁰² Reply (Curtis), ¶ 285. ↩

[Page 186]

567. Venezuela notes that the Conoco Parties argued throughout the first phase of the case that the expropriation was unlawful per se and the valuation date should be moved to the date of the Award. But they never contested that if they were wrong on that point, then the valuation date should not be moved. After the 2010 Hearing, the Tribunal found the expropriation lawful in all respects other than payment of compensation (i.e., sub modo). Nevertheless, the Majority in 2013 and the subsequently reconstituted Tribunal ignored, without warning, the Parties' agreement on the basis for calculating compensation and, exceeding its powers, obliterated the distinction between expropriation unlawful per se and sub modo.⁷⁰³

FAILURE TO STATE REASONS

568. Venezuela (Curtis) argues that the Tribunal Majority had no basis to state in the operative part of the 2013 Decision that “the Respondent breached its obligation to negotiate in good faith for compensation for its taking of the ConocoPhillips assets in the three projects on the basis of market value as required by Article 6(c) of the BIT."⁷⁰⁴ Venezuela refers to the dissenting opinion of Prof. Abi-Saab, who characterized that as an "utter decision by surprise."⁷⁰⁵ Venezuela argues, contrary to Conoco, that the issue is not if the Tribunal Majority stated reasons for their decision that the parties must engage in good faith negotiations; the issue is how the Tribunal came to that conclusion -for which the Tribunal provided no rational explanation.⁷⁰⁶

569. Further, the finding of failure to negotiate in good faith was the sole basis for determining that the date of valuation should be the date of the Award (rather than the date of expropriation).⁷⁰⁷ Venezuela submits that after the finding of the 2013 Decision, the Conoco Parties proceeded to argue bad faith negotiation, while Venezuela countered with three requests for reconsideration and during the 2016 hearings.⁷⁰⁸

⁷⁰³ Memorial (Curtis), ¶¶ 610-615. ↩
⁷⁰⁴ Memorial (Curtis), ¶¶ 411, 491. ↩
⁷⁰⁵ Memorial (Curtis), ¶ 617, citing A/R-4 [Curtis] / A/R-45 [De Jesús], Abi-Saab Dissenting Opinion, ¶ 282. ↩
⁷⁰⁶ Reply (Curtis), ¶ 293. ↩
⁷⁰⁷ Memorial (Curtis), ¶ 617. ↩
⁷⁰⁸ Memorial (Curtis), ¶ 618. ↩

[Page 187]

570. Venezuela argues that there is contemporaneous evidence that Venezuela negotiated in good faith based on fair market value and refers to the witness testimony of Mr. Goff and to the information the Conoco Parties' negotiators conveyed to the U.S. Embassy in Caracas. Yet, the reconstituted Tribunal in the 2017 Interim Decision decided - against the clear terms of the 2013 Decision- that the 2013 Decision did not find a lack of good faith, failing to explain why it had allowed the Parties to litigate for over three years based on a presumed misunderstanding. In Venezuela's view the “clarification” of the issue of good faith negotiation in the 2017 Interim Decision was an improper attempt to salvage the fundamentally flawed 2013 Decision, which the Tribunal refused to reconsider.⁷⁰⁹

571. Importantly, if, as the 2017 Interim Decision ruled, there was no lack of good faith negotiation, it follows, according to the unanimous view of the Tribunal in 2013, that the expropriation was not illegal, and the valuation date must be the date of the expropriation. It is therefore impossible to follow the Tribunal's reasoning from the 2013 Majority to the 2017 Interim Decision and the Award, which warrants annulment within the meaning of Convention Article 52(1)(e).

572. Further, Venezuela argues that the rulings of the reconstituted Tribunal on the illegality of the expropriation and valuation date are incomprehensible. Those rulings were based on the finding that Venezuela made no compensation offers or that those were inadequate, not based on market valuation. Yet, Venezuela refers to undisputed facts on the record pointing to the contrary, including: the U.S. Embassy cables showing that Venezuela was negotiating fair market value; the Executive Vice President for Exploration and Production of ConocoPhillips announcing at an investors' conference that Venezuela was negotiating on the basis of fair market value; and testimony from Venezuela's and the Conoco Parties' witnesses that Venezuela was negotiating fair market value. It is therefore impossible to understand how the reconstituted Tribunal

⁷⁰⁹ Memorial (Curtis), ¶¶ 619-622 ↩

[Page 188]

concluded that Venezuela failed to negotiate on the basis of fair market value principle.⁷¹⁰

573. Finally, the Tribunal failed to state sufficient reasons for moving the valuation date. Even if Venezuela had not negotiated fair market value and even if it had not made compensation offers, the valuation date should have remained to be the expropriation date.⁷¹¹

574. Article 6(c) of the BIT mandates that valuation in the case of expropriation be done as within a time immediately prior to the expropriation. Even if customary international law is applied instead of the BIT's valuation date, as held by the Tribunal, in accordance with the Chrozów Factory principle, the valuation date still remains as the date of dispossession, unless the expropriation is unlawful per se.⁷¹²The Parties and the Tribunal relied on Chorzów Factory; however, without any colorable reasons, the Tribunal moved the valuation date forward to the Award's date, resulting in a huge increase in the amount of the Award.⁷¹³The Tribunal overlooked that when failure to compensate is the only wrongful act and the expropriation is not unlawful per se, the valuation date remains unchanged.

575. For Venezuela it is impossible to follow the Tribunal's reasoning from its acknowledgement of Chorzów Factory principle to the conclusion that the valuation date should be moved, which warrants annulment pursuant to Convention Article 52(1)(e) for failure to state reasons.

576. In its Reply, Venezuela submits, among others, that Conoco merely answers that the Committee cannot reassess evidence nor substitute findings for those of the Tribunal, nor evaluate the correctness or adequacy of the reasoning. But Venezuela's position is that the Tribunal may not make decisions and render Awards totally disconnected from facts and contradicted by the record. In this vein, Venezuela refers, among other facts

⁷¹⁰ Memorial (Curtis), ¶¶ 628-630; Reply (Curtis), ¶¶ 296, 306. ↩
⁷¹¹ Memorial (Curtis), ¶ 633. ↩
⁷¹² Memorial (Curtis), ¶ 634; Reply (Curtis), ¶ 292. ↩
⁷¹³ Memorial (Curtis), ¶¶ 635, 636. ↩

[Page 189]

of the record,⁷¹⁴ to Conocos' own 2007 valuations whose combined value of USD 5.855 billion, Venezuela submits, were not that far from Venezuela's offer of USD 4 billion recorded in Conoco's Request for Arbitration. There is thus no rational explanation for a finding that Venezuela failed to negotiate on a fair market value basis. Venezuela also argues that Conoco fails to deal with the indicia of fair market value, including their valuations, and simply recites the Tribunal's statements of the 2017 Interim Decision, which Venezuela labels as “incomprehensible.”⁷¹⁵

SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE

577. Venezuela (Curtis) submits that the reconstituted Tribunal seriously departed from a fundamental rule of procedure by ordering the Parties to produce documents covered by their Confidentiality Agreement.⁷¹⁶

578. The protection of settlement privilege is a fundamental rule of procedure, the more so if the parties have entered into a confidentiality agreement to expressly preserve confidentiality as with the present case. Venezuela refers to scholarly articles on the subject, proposing that a tribunal's failure to respect settlement privilege can be a ground for setting aside an award.⁷¹⁷ Venezuela refers to orders by arbitral tribunals in investment arbitrations that documents covered by settlement privilege should be shield from document production.⁷¹⁸ Venezuela also relies on the committee's decision in Libananco v. Turkey, in which, Venezuela submits, the committee fully endorsed the tribunal's decision to exclude from evidence all privileged documents.⁷¹⁹

⁷¹⁴ See Reply (Curtis), ¶ 306. ↩
⁷¹⁵ Reply (Curtis), ¶¶ 303-306, 309. ↩
⁷¹⁶ Memorial (Curtis), ¶ 638. ↩
⁷¹⁷ Memorial (Curtis), ¶ 640. ↩
⁷¹⁸ Memorial (Curtis), ¶¶ 641, 642, citing A/RLA-137 [Curtis], Merrill & Ring Forestry L.P. v. Canada, ICSID Case No. UNCT/07/1, Confidentiality Order, 18 February 2008, ¶ 22; A/RLA-138 [Curtis], Gramercy Funds Management LLC and Gramercy Peru Holdings LLC v. Republic of Peru, ICSID Case No. UNCT/18/2, Procedural Order No. 3, 12 July 2018, ¶ 26. ↩
⁷¹⁹ Memorial (Curtis), ¶ 643, citing A/RLA-143 [Curtis], Libananco Holdings Co. Limited v. Republic of Turkey, ICSID Case No. ARB/06/8, Excerpts of Decision on Annulment, 22 May 2013, (“Libananco Annulment Decision”), ¶ 157. ↩

[Page 190]

579. Here, the Tribunal ordered Venezuela to produced documents covered by the Confidentiality Agreement, with the penalty of adverse inferences drawn against Venezuela. In Venezuela's view, the Tribunal's justification for its decision was frivolous, and the Tribunal misconstrued and relied on confidential documents for its 2017 Interim Decision. This conduct, Venezuela submits, was a serious departure from a fundamental rule of procedure warranting annulment pursuant to Convention Article 52(1)(d).⁷²⁰

580. In its Reply, Venezuela argues that it would set a dangerous precedent if ICSID tribunals could simply overlook settlement privilege and attorney-client privilege. Besides, the issue here is the Tribunal disregarded the Parties' express agreement prohibiting the production of documents exchanged in compensation negotiations. Further, Venezuela maintains that it was clear that Venezuela was negotiating compensation in good faith based on fair market value. As such, regarding the production of those documents, Venezuela's concern was that the Tribunal would be influenced by the amounts of compensation Venezuela offered to avoid litigation, causing the Tribunal to view that Conoco's interests in the Projects were greater than the compensation offered. The proposed monetary amounts of compensation, according to Venezuela, were based on assumptions that did not reflect the reality of the fields or other factors that bore upon fair market value.⁷²¹

581. Also, contrary to Conoco's position, Venezuela argues that it did not waive its right to invoke settlement privilege by relying on the U.S. Embassy cables. The Confidentiality Agreement does not cease to exist because the Conoco Parties breached it by talking to the U.S. Embassy. The U.S. Embassy cables became public through no fault of Venezuela and Venezuela introduced the cables to show that the Conoco Parties had misrepresented Venezuela's position in the negotiations.⁷²²

⁷²⁰ Memorial (Curtis), ¶ 644. ↩
⁷²¹ Reply (Curtis), ¶¶ 347, 348. ↩
⁷²² Reply (Curtis), ¶ 350. ↩

[Page 191]

C.1(2) THE TRIBUNAL'S FINDINGS UNDER ARTICLE 6 OF THE TREATY AS ARGUED BY VENEZUELA (DE JESÚS)

MANIFEST EXCESS OF POWERS

582. Venezuela (De Jesús) argues that the Tribunal manifestly exceeded its powers (i) by deciding ultra petita that the Republic had “breached its obligation to negotiate in good faith. [...]"⁷²³; and (ii) by failing to apply the proper law regarding Article 6 of the BIT. Also, the reconstituted Tribunal manifestly exceeded its powers by (iii) failing to apply the proper law to the issue of expropriation.

583. For Venezuela, the issue of “good faith” was the foundation upon which the Tribunal Majority cemented its finding that Venezuela had breached Article 6(c) of the BIT. In other words, without the interpretation by the Tribunal Majority that Article 6 of the BIT requires “good faith,” there would have been no breach of that Article of the Treaty.⁷²⁴

584. On the issue of ultra petita, Venezuela relies on the decision of the ad hoc committee in Occidental,⁷²⁵ to argue that a manifest excess of powers occurs when tribunals decide on matters the parties have not raised. Here, the Conoco Parties did not claim that Venezuela had breached its good faith obligation to negotiate. Venezuela finds support by referring to the dissenting opinions of Prof. Abi-Saab and Mr. Bucher, both of which stated that Article 6 of the BIT did not include an obligation to negotiate in good faith, and that the Claimants had not made such claim.⁷²⁶ In these circumstances, Venezuela submits, there is no doubt as to the “manifest” nature of the excess.

585. In its Reply, Venezuela stated that Conoco's generic claim that Venezuela had unlawfully expropriated their assets in breach of BIT Article 6 is substantially different

⁷²³ Memorial (De Jesús), ¶ 244, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 404(d). ↩
⁷²⁴ Memorial (De Jesús), ¶¶ 256, 257. ↩
⁷²⁵ Memorial (De Jesús), ¶ 242, citing Occidental Annulment Decision, ¶¶ 50-51. ↩
⁷²⁶ Memorial (De Jesús), ¶¶ 247-254, citing A/R-4 [Curtis] / A/R-45 [De Jesús], Abi-Saab Dissenting Opinion, ¶ 282; and A/R-25 [Curtis] / A/R-66 [De Jesús], Abi-Saab Dissenting Opinion II – Reconsideration Request, ¶ 11; Reply (De Jesús), ¶¶ 353-355. ↩

[Page 192]

from the specific claim that Venezuela breached the BIT's obligation to negotiate compensation in good faith.⁷²⁷ Also, Venezuela submits that the legal framework set out by the Parties' in the arbitration did not include an alleged breach of the non-existent obligation to negotiate compensation in good faith. Thus, the Committee cannot allow the Conoco Parties to expand on the legal framework of Venezuela's liability in the arbitration to deny that there was ultra petita.⁷²⁸ Conoco's reliance on Klöckner is misplaced. That case referred to a tribunal's examination of the jurisdictional “legal framework,” while here the issue is that the Tribunal decided that Venezuela had breached the BIT based on an argument not made by either Party, which is also beyond the legal framework of Venezuela's liability.⁷²⁹ Venezuela also argues that the transcript of the 2010 Hearing reveals that Conoco did not claim that the Republic had breached an alleged obligation to negotiate in good faith embedded in the BIT. The Conoco Parties simply did not make that claim in the arbitration and neither did Venezuela respond that it had complies with the BIT's non-existent obligation to negotiate in good faith.⁷³⁰ Lastly, the ultra petita is not cured by Venezuela's three reconsideration requests. The excess of powers, in Venezueal's view, occurred with the issuance of the 2013 Decision.⁷³¹

586. Further, Venezuela argues the Tribunal Majority exceeded its powers when in the 2013 Decision it egregiously misapplied the terms of Article 6 of the BIT to declare that Venezuela had breached a non-existing “obligation to negotiate in good faith for compensation.” Venezuela submits that the Majority constructed, without support, Article 6 as encompassing three conditions: first, an obligation to negotiate; second, a negotiation in good faith; and third, a negotiation in reference to the standard of “market value" set out in the BIT. None of these conditions are found in Article 6 of the BIT, which were also pointed out by Prof. Abi-Saab and Mr. Bucher in their respective dissents. These opinions serve as contemporaneous evidence on the egregious

⁷²⁷ Reply (De Jesús), ¶ 358. ↩
⁷²⁸ Reply (De Jesús), ¶¶ 359, 360. ↩
⁷²⁹ Reply (De Jesús), ¶ 361. ↩
⁷³⁰ Reply (De Jesús), ¶¶ 362-366. ↩
⁷³¹ Reply (De Jesús), ¶ 367. ↩

[Page 193]

misapplication of Article 6 of the BIT. Besides, the excess is “manifest” as it can be easily perceived from a reading of Article 6, which does not enshrine these three obligations.⁷³²

587. Also, the finding that Venezuela “breached its obligation to negotiate in good faith” contradicts Article 9(3) of the BIT, which requires that the award “shall be limited to determining whether there is a breach by the Contracting Party concerned of its obligations under this Agreement.”⁷³³Yet, the Majority did not refer to any ground in Article 6(c) of the BIT as a basis for its finding that the provision encompasses an obligation to negotiate in good faith. Such gross misapplication of the law is tantamount to failure to apply the proper law and annullable pursuant to Article 52(1)(b).

588. Venezuela also argues excess of powers on part of the reconstituted Tribunal, specifically when in the Interim Decision it decided that Venezuela had “unlawfully expropriated" the ConocoPhillips Dutch Companies' assets. Venezuela submits that such finding resulted from an egregious misapplication of the law that is tantamount to failure to apply the proper law. Venezuela submits that the U.S. Embassy cables pertaining to the negotiations between the Conoco Parties and Venezuela was objective and contemporaneous evidence that belied the finding that Venezuela had breached its obligation to negotiate in good faith.⁷³⁴

589. Further, the Tribunal denied Venezuela's third request for reconsideration as well as Venezuela's claim that the Conoco Parties had made misrepresentations to the Tribunal. Instead, the reconstituted Tribunal in its Interim Decision modified the dispositif of the 2013 Decision, and simply replaced the breach “to negotiate in good faith" for a breach of “Article 6 of the BIT by unlawfully expropriating the Claimant's [sic] investments in the three Projects in the Orinoco Beltin [sic] Venezuela.”⁷³⁵

⁷³² Memorial (De Jesús), ¶¶ 282-284; Reply (De Jesús), ¶¶ 394-402. ↩
⁷³³ Memorial (De Jesús), ¶ 438, citing R-013 (A/C-63), Agreement on Encouragement and Reciprocal Protection of Investments (with Protocol), Venezuela - Netherlands, 22 October 1991, entered into force 1 November 1993, 1788 U.N.T.S. 45, Article 9.3. ↩
⁷³⁴ Memorial (De Jesús), ¶ 326 ↩
⁷³⁵ Memorial (De Jesús), ¶¶ 328, 329. ↩

[Page 194]

590. Venezuela submits that the Tribunal identified conditions in Article 6(c) of the BIT which the Majority had failed to identify, including that the state must negotiate proactively, making concrete proposals which are likely to meet the required level of compensation (market value) and which should have a chance to be approved by the investor.⁷³⁶ Venezuela argues that the reconstituted Tribunal added conditions to Article 6(c) of the BIT to convert its terms into an obligation de résultat to justify its finding that Venezuela had “unlawfully expropriated” the Conoco Parties. However, the terms of Article 6(c) only require measures “against just compensation” allowing host States to meet the requirement by establishing a procedure or by offering a sum; Article 6(c) does not require a specific reference to a calculation method in making an offer to the expropriated investor.⁷³⁷Venezuela made several offers of compensation, all of which were found inadequate by the Conoco Parties.⁷³⁸ Also, as evidenced from the testimonies of the Conoco Parties' witness (Mr. Geoff) and Venezuela's witnesses (Dr. Mommer and Dr. Boué), Venezuela was not negotiating “book value."⁷³⁹

591. Additionally, the Tribunal failed to apply the terms of Article 6(c) of the BIT and incorrectly interpreted it as requiring the compensation amount offered by the host State to be calculated in a specific method. This is a gross misapplication of the law as shown by Prof. Abi-Saab in his Dissenting Opinion to the 2013 Decision. Venezuela also refers to the Exxon Mobil case to argue that the Tribunal should have, like in that case, determined whether the offers made were compatible with just compensation under Article 6 of the BIT. If the Tribunal had done so, it would have found the expropriation to be lawful.⁷⁴⁰

592. Venezuela asks that the Committee pursuant to Convention Article 52(1)(b) annul the ultra petita finding in the 2013 Decision that the “Republic breached its obligation to negotiate in good faith compensation,” which also constitutes a failure to apply the

⁷³⁶ Memorial (De Jesús), ¶ 334. ↩
⁷³⁷ Memorial (De Jesús), ¶ 337. ↩
⁷³⁸ Memorial (De Jesús), ¶ 341. ↩
⁷³⁹ Memorial (De Jesús), ¶¶ 350, 351. ↩
⁷⁴⁰ Memorial (De Jesús), ¶¶ 344-346, citing A/CLA-75 (CL-348), Venezuela Holdings, B.V., and others v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/07/27, Award, 9 October 2014, (“Venezuela Holdings Award"). ↩

[Page 195]

proper law; Venezuela also submits that, par voie de conséquence, such annulment will affect the Interim Decision and the Award that draws the consequences of the 2013 Decision seeking to provide compensation for an alleged breach of Article 6 of the BIT.⁷⁴¹ Venezuela also requests annulment of the Interim Decision's declaration that Venezuela “unlawfully expropriated” the Conoco Parties' assets and par voie de conséquence, annulment of the Award seeking to quantify the compensation due for such unlawful expropriation.⁷⁴²

593. Venezuela also argues that the Tribunal manifestly exceeded its powers by determining the valuation date pursuant to international law rather than pursuant to the BIT. The Tribunal failed to apply the applicable law in toto, disregarding the express terms of Article 6(c) of the BIT that require compensation for expropriation to be assessed at the date of dispossession.

594. Further, by applying customary international law and the standard of “full compensation" (Chorzów Factory) instead of the standard of Article 6(c) of the BIT, the Tribunal exceeded the limits of the powers vested upon it under Article 9(3) of the BIT. Under Article 9(3) the Tribunal lacked authority to award damages beyond those caused by a breach of the Treaty and was, therefore, prevented from moving the valuation date from the date of dispossession to the date of the Award. The Tribunal accepted that the ConocoPhillips Dutch Companies were entitled to compensation for the lucrum cessans, reinstating the Companies to the position they would have occupied but for the entire expropriation, rather than just Venezuela's failure to provide just compensation. Yet, it was undisputed that Venezuela had complied with Articles 6(a) and (b), save for the issue of just compensation of Article 6(c).⁷⁴³

595. In any event, the Tribunal failed to apply the international customary principles it purported to apply regarding full reparation. Full reparation seeks to reinstate the injured party to the position it would have occupied but for the breach, and not in a

⁷⁴¹ Memorial (De Jesús), ¶¶ 259, 289. ↩
⁷⁴² Memorial (De Jesús), ¶ 355. ↩
⁷⁴³ Memorial (De Jesús), ¶¶ 427-440. ↩

[Page 196]

more favorable position. However, the Tribunal reinstated the Companies to the position they would be have occupied had they retained their interest in the Projects after the expropriation, whereas the correct condition in the but for test is the lack of payment of just compensation.⁷⁴⁴

596. Further, the Tribunal usurped powers by determining the valuation date. The Tribunal decided the valuation date ex aequo et bono, fixing it on the date of the Award because rising oil prices after the date of the expropriation gave a more favorable compensation. This decision was not based on the proper law, but on an unauthorized and wrong aequo ex bono consideration.⁷⁴⁵

SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE

597. Venezuela argues that the ultra petita finding that Venezuela “breached its obligation to negotiate in good faith” also constitutes a serious departure from a fundamental rule of procedure, because the Tribunal Majority deprived Venezuela of its right to be heard and its right to defense. Venezuela relies on the decision of the Wena committee defining the "right to be heard” as a fundamental right and part of a minimal standard of procedure to be respected under Convention Article 52(1)(d).⁷⁴⁶ Venezuela also refers to the decision of the ad hoc committee in Pey Casado v. Chile, to argue that in the face of a serious departure from a fundamental rule, a committee has no discretion not to annul an award.⁷⁴⁷

598. Venezuela explains that the Conoco Parties did not address the issue of good faith negotiations in their submissions or during the 2010 Hearing, nor did the Republic.⁷⁴⁸ The Tribunal Majority failed to submit the issue of good faith negotiation to the Parties' consideration before issuance of the 2013 Decision. Thereby, the Tribunal deprived Venezuela of its due process right to be heard, to defend itself or to submit evidence on

⁷⁴⁴ Memorial (De Jesús), ¶¶ 444-451. ↩
⁷⁴⁵ Memorial (De Jesús), ¶ 456. ↩
⁷⁴⁶ Memorial (De Jesús), ¶ 263, citing Wena Annulment Decision, ¶ 57. ↩
⁷⁴⁷ Memorial (De Jesús), ¶ 268, citing Pey Casado Annulment Decision, ¶ 80. ↩
⁷⁴⁸ Memorial (De Jesús), ¶ 265. ↩

[Page 197]

that crucial issue.⁷⁴⁹ Venezuela also submits that Prof. Abi-Saab noted in his dissent that the Tribunal's ultra petita finding violated the Parties' procedural rights.⁷⁵⁰

599. Venezuela argues that the departure is serious since it deprived Venezuela of the protection envisaged under the rule i. In Venezuela's Reply, it argues that despite Conoco's allegations to the contrary, Venezuela's actions after the departure (i.e., the issuance of the 2013 Decision) cannot have any bearing on such departure. The Tribunal might have reached a different conclusion in the 2013 Decision and later in the Award, had it allowed Venezuela to state its case and present evidence on that issue. Venezuela submits in the present case, the Conoco Parties posit a heightened standard requiring that the departure leads to a substantially different result, which restricts annulment in the presence of departures from fundamental rules. Venezuela refers to the standards adopted in Caratube and Pey Casado and argues that a party is not required to prove that the violation of the rule was decisive for the outcome or that it would have won the case.⁷⁵¹

600. In summary, Venezuela submits that deciding on an issue not raised nor discussed by the Parties is a serious departure which vitiates the 2013 Decision, and par voie de conséquence also vitiates the Interim Decision that sought to clarify the “true meaning” of the Majority's finding on the issue of good faith negotiation under Article 6 of the BIT.⁷⁵²

FAILURE TO STATE REASONS

601. Venezuela (De Jesús) also asks the Committee to annul the 2013 Decision, the Interim Decision, and the Award, pursuant to Article 52(1)(e). Venezuela submits they should be annulled because: (i) the Tribunal Majority failed to provide any reasons for its finding in the 2013 Decision that Venezuela had “breached its obligation to negotiate

⁷⁴⁹ Memorial (De Jesús), ¶ 267; Reply (De Jesús), ¶¶ 373-376. ↩
⁷⁵⁰ Reply (De Jesús), ¶ 375, citing A/R-4 [Curtis] / A/R-45 [De Jesús], Abi-Saab Dissenting Opinion, ¶¶ 282-284. ↩
⁷⁵¹ Reply (De Jesús), ¶ 380. ↩
⁷⁵² Memorial (De Jesús), ¶ 269; Reply (De Jesús), ¶ 385. ↩

[Page 198]

in good faith for compensation [...] on the basis of market value,”⁷⁵³ and (ii) the reconstituted Tribunal failed to provide reasons for its finding in the Interim Decision that Venezuela had “unlawfully expropriated the Conoco Parties' assets.”⁷⁵⁴

602. Venezuela submits that, as explained by the Amco committee, there must be a "reasonable connection between the bases invoked by a tribunal and the conclusions reached by it."⁷⁵⁵Yet, the Tribunal failed to provide any reasons, or it provided inadequate reasons for its finding. Venezuela argues that the Tribunal, without referring to any law, case law, authority, or arguments by either Party, affirmed that: “[I]t is also commonly accepted that the Parties must engage in good faith negotiations to fix the compensation in terms of the standard set, in this case, in the BIT, if a payment satisfactory to the investor is not proposed at the outset.”⁷⁵⁶This sentence, Venezuela submits, is the extent of the Tribunal's “reasoning,” which offers no “reasonable connection" regarding the breach of the BIT.⁷⁵⁷

603. Furthermore, Venezuela questions, among others, the following points: How did the Tribunal reach its conclusion regarding “good faith negotiations” when if neither Party raised it? How did the Tribunal interpret Article 6(c) of the BIT to entail the “commonly accepted notion" of good faith negotiation when “good faith” was not mentioned in that article? To whom was the Tribunal referring in its statement “it is commonly accepted...?" and how did the Tribunal conclude that Venezuela had not offered a satisfactory payment at the outset of the expropriation or migration? Applying the test in MINE, it is not possible to follow the reasons from point A to B, even assuming that the Tribunal applied the law.⁷⁵⁸

⁷⁵³ Memorial (De Jesús), ¶ 290. ↩
⁷⁵⁴ Memorial (De Jesús), ¶ 356. ↩
⁷⁵⁵ Memorial (De Jesús), ¶ 293, citing A/RLA-62 [De Jesús] / A/RLA-113 [Curtis], Amco Asia Corporation and others v. Republic of Indonesia, ICSID Case No. ARB/81/1, Ad Hoc Committee Decision on the Application for Annulment, 16 May 1986, ¶ 43. ↩
⁷⁵⁶ Memorial (De Jesús), ¶ 298, citing A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 362. ↩
⁷⁵⁷ Reply (De Jesús), ¶¶ 413-415. ↩
⁷⁵⁸ Memorial (De Jesús), ¶¶ 300-310; Reply (De Jesús), ¶¶ 411-418. ↩

[Page 199]

604. Contrary to Conoco's view, Venezuela affirms that these are not rhetorical questions, and Prof. Abi-Saab and Mr. Bucher raised them in their respective dissents.⁷⁵⁹ Moreover, several committees, notably in Soufraki, have found that inadequate or insufficient reasoning can lead to annulment, despite Conoco's contention for a heightened standard that would prevent committees from reviewing such reasons. Venezuela also refutes Conoco's contention that there was “common acceptance” that the legality of the expropriation was contingent on whether Venezuela had negotiated compensation in good faith.⁷⁶⁰

605. Venezuela recalls that it requested three times the reconsideration of the 2013 Decision, and while all requests were rejected, the Tribunal still found itself at odds with the 2013 Decision's untenable finding, which led to the Interim Decision in an attempt to find its “true meaning.”⁷⁶¹ Even the Interim Decision denotes the serious faults of the 2013 Decision, which failed to define “good faith" or to legally examine its components in relation to the evidence.⁷⁶²

606. Regarding the Interim Decision, Venezuela submits it should be annulled because the reconstituted Tribunal gave contradictory statements concerning the 2013 Decision, which were integrated into the Award.⁷⁶³ Venezuela argues that to assess if a tribunal has failed to state reasons, the Committee is empowered to review the award's reasoning. On this point, Venezuela refers to the decision of the Caratube committee, according to which “... [c]ontradictory reasons cancel each other and will not enable the reader to understand the tribunal's motives. [...]”⁷⁶⁴

607. Here, the Tribunal's reasons cancel each other out in respect to its determination as to "the true meaning of the 2013 Decision on Jurisdiction and Merits.” In the Interim Decision the reconstituted Tribunal concluded -against the explicit terms of the 2013

⁷⁵⁹ Reply (De Jesús), ¶ 417 ↩
⁷⁶⁰ Reply (De Jesús), ¶¶ 419-427. ↩
⁷⁶¹ Memorial (De Jesús), ¶¶ 313-316. ↩
⁷⁶² Memorial (De Jesús), ¶ 319. ↩
⁷⁶³ Memorial (De Jesús), ¶ 356. ↩
⁷⁶⁴ Memorial (De Jesús), ¶ 358, citing Caratube Annulment Decision, ¶ 102. ↩

[Page 200]

Decision- that the Majority did not mean that there was lack of good faith, but “simply" that Venezuela failed to be involved in negotiations leading to an offer complying with the requirements of “just compensation” and “market value.” Yet, the reconstituted Tribunal also stated that “2013 Decision's conclusion is to be taken for what it says and nothing more.”⁷⁶⁵ Then, in the Award paragraph 1009 incorporates the 2013 Decision in toto and the Interim Decision in toto - with the contradiction that the 2013 Decision found a breach of good faith negotiation (at paragraph 404(d)) and the Interim Decision did not (at paragraph 60).⁷⁶⁶

608. Venezuela asks that the Committee annul the 2013 Decision for failure to state reasons for the finding that Venezuela “breached its obligation to negotiate in good faith for compensation [...]." And par voie de conséquence, that the Committee annul the Interim Decision and the Award which seeks to provide compensation for an alleged breach under Article 6 of the BIT.

609. Venezuela also asks that the Committee annul the Interim Decision for failing to state reasons regarding its decision to “clarify” the “true meaning of the 2013 Decision on Jurisdiction and the Merits” and par voie de conséquence, the Award, which seeks to determine the compensation due for the breach of Article 6 of the BIT.⁷⁶⁷

610. For Venezuela, Conoco's argument that the 2013 Decision and Interim Decision are "wholly consistent” can be summarily disposed of by comparing their dispositive parts: both found Venezuela in breach of BIT's Article 6, yet each grounded the breach in different non-existent requirements. Additionally, if the decisions were wholly consistent, there would be no need for the Interim Decision to clarify the 2013 Decision. Venezuela notes that its claims target the Award's incorporations of the contradictory operative parts of each Decision; thus Conoco's argument that the Interim Decision confirmed the 2013 Decision misses the point.⁷⁶⁸

⁷⁶⁵ Memorial (De Jesús), ¶¶ 359-362, citing A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶ 65. ↩
⁷⁶⁶ Memorial (De Jesús), ¶¶ 361-363; Reply (De Jesús), ¶¶ 468-473. ↩
⁷⁶⁷ Memorial (De Jesús), ¶ 365. ↩
⁷⁶⁸ Reply (De Jesús), ¶¶ 482, 483. ↩

[Page 201]

C.1(3) THE TRIBUNAL'S FINDINGS UNDER ARTICLE 6 OF THE TREATY (CONOCO)

NO MANIFEST EXCESS OF POWERS

611. Conoco counters that Venezuela's arguments on the alleged manifest excess of powers are complaints on the Tribunal's interpretation or application of Article 6 of the BIT. Even if the complaints were correct (they are not), they would not be a basis for annulment. An error of law is no ground for annulment. Venezuela tries to argue that the error was so egregious tantamount to non-application of the law.⁷⁶⁹

612. Here, the Tribunal correctly identified the applicable law and applied it reaching the correct outcome (but it would not make a difference if the Tribunal had erred in the outcome). The Tribunal's decision was not made with a manifest (obvious, self-evident, clear, flagrant) disregard of the applicable law. The Tribunal Majority recounted the general criteria for lawful expropriation in Article 6 of the BIT and then specifically considered what Venezuela had to do to satisfy the compensation requirements in Article 6(c). The Tribunal's interpretation of Article 6(c) is “payment is not required at the precise moment of expropriation" because Article 6(c) also includes "requirements for prompt payment and for interest.” As such, the Tribunal Majority came to the view that if payment is not made at the precise moment of expropriation, the State must negotiate compensation in good faith based on the BIT's fair market value standard. The Tribunal applied the applicable law (Article 6 of the BIT), even if a party may agree or disagree with the Tribunal's interpretation of the BIT.⁷⁷⁰ In its Rejoinder, Conoco argues that the Tribunal clearly interpreted and applied Article 6, which Venezuela acknowledges is the applicable law. The Tribunal's interpretation and legal determination made on the basis of Article 6 are within the exclusive purview of the Tribunal which cannot be reconsidered on annulment.⁷⁷¹

613. The Tribunal Majority correctly interpreted Article 6, as confirmed by the reconstituted Tribunal, so that even if a de novo review of the Award were permitted on annulment,

⁷⁶⁹ Counter-Memorial (Conoco), ¶¶ 505, 506. ↩
⁷⁷⁰ Counter-Memorial (Conoco), ¶¶ 506, 507; Rejoinder (Conoco), ¶ 162. ↩
⁷⁷¹ Rejoinder (Conoco), ¶ 167. ↩

[Page 202]

Venezuela's argument would fail. Conoco argues that the Mobil case accords with the analysis of the 2013 Decision and the 2017 Interim Decision, even though in that case the tribunal majority did not find a breach of Article 6 of the BIT. In both cases (Mobil and the present case) the finding as to whether Venezuela had breached Article 6 turns on the question of whether Venezuela had made adequate compensation offers during negotiations. Even if Article 52(1)(b) permitted a review of a tribunal's reasoning, Mobil shows that the reasoning in this case was correct, or at least consistent with the conclusions of other tribunals. In these circumstances, there can be no manifest excess of powers.⁷⁷² In its Rejoinder, Conoco characterizes Venezuela's reliance on Mobil as superficial, in that it fails to accept that different facts in different cases can lead to different outcomes. Contrary to Venezuela's submission, the Mobil tribunal did not rule that Article 6 is satisfied when a state acknowledges its obligation to compensate and makes compensation offers. Instead, it ruled that the precise terms of a compensation offer must be evaluated to determine Venezuela's compliance with Article 6(c), and this is precisely what this Tribunal did.⁷⁷³

614. Conoco asserts that the Tribunal considered the arguments and evidence produced and concluded that Venezuela had failed to offer market value compensation as required by Article 6. Venezuela's excess of powers argument is a criticism of the Tribunal's assessment of the evidence. Ad hoc committees have no power to review the Tribunal's evaluation of the evidence. Under ICSID Arbitration Rule 34, an ICSID tribunal is the sole judge of the admissibility of any evidence adduced and of its probative value.⁷⁷⁴ Even if the Committee engaged in an impermissible review, such review would show that the Tribunal reasonably assessed the evidence, including the U.S. Embassy cables and Mr. Goff's testimony.⁷⁷⁵

615. In its Rejoinder, Conoco notes that Venezuela's argument that the Tribunal should have evaluated the lawfulness of the taking by looking at whether Venezuela had made offers

⁷⁷² Counter-Memorial (Conoco), ¶ 511. ↩
⁷⁷³ Rejoinder (Conoco), ¶¶ 164, 165. ↩
⁷⁷⁴ Counter-Memorial (Conoco), ¶¶ 512-515. ↩
⁷⁷⁵ Rejoinder (Conoco), ¶ 169. ↩

[Page 203]

prima facie reasonable or compliant with “just compensation” (as opposed to assessing the offers made against “a specific calculation method,” i.e., market value). Conoco submits that this was an argument advanced by Venezuela for the first time in the annulment proceeding. In any case, disputes about the proper interpretation of Article 6 are beside the point, and all that is relevant to the Committee's present inquiry is whether the Tribunal identified and sought to apply the applicable law.⁷⁷⁶

616. Also, the Tribunal did not rule ultra petita when deciding that Venezuela “breached its obligation to negotiate in good faith for compensation ... on the basis of market value as required by Article 6(c) of the BIT.” That finding, Conoco submits, was well within the legal framework established by the Parties' claims and allegations in this case. The Claimants asked the Tribunal to declare that Venezuela unlawfully expropriated the investments under Article 6, including by “never offer[ing]- let alone provid[ing]- fair, prompt and adequate compensation to the Claimants even though that obligation was codified in ... Article 6 of the Treaty.”⁷⁷⁷In the merits phase, the Claimants expressly argued Venezuela's breach of Article 6 for failure to pay fair market value compensation or to negotiate in good faith according to that standard.⁷⁷⁸Venezuela countered that it had negotiated in good faith and offered fair market value compensation, but the parties disagreed on the amount.⁷⁷⁹ The Parties also relitigated the legality of the expropriation between the issuance of the 2013 Decision and the issuance of the 2017 Interim Decision. Specifically, the question of the scope of the Tribunal's finding that Article 6 had been breached was raised at the 2016 organizational hearing, was briefed by the Parties in multiple rounds between March and May 2016, was debated at the August 2016 Hearing, and was argued in the September 2019 post-hearing Briefs.⁷⁸⁰

⁷⁷⁶ Rejoinder (Conoco), ¶ 171. ↩
⁷⁷⁷ Counter-Memorial (Conoco), ¶ 518, citing A/R-177 [Curtis] / A/R-166 [De Jesús], Claimants' Memorial on the Merits, ¶ 309. ↩
⁷⁷⁸ Counter-Memorial (Conoco), ¶ 519. ↩
⁷⁷⁹ Counter-Memorial (Conoco), ¶ 520. ↩
⁷⁸⁰ Counter-Memorial (Conoco), ¶ 523; Rejoinder (Conoco), ¶ 175. ↩

[Page 204]

617. In its Rejoinder Conoco counters Venezuela's argument that Conoco's claim was too generic to support the Tribunal's ruling that Venezuela failed to negotiate compensation in good faith. Conoco maintains that the Tribunal's decision was within the legal framework of the Parties' submissions, as the Claimants argued unlawful expropriation in breach of Article 6, inter alia, by Venezuela's failure to comply with the compensation requirement. Conoco submits that, in any event, the Parties did debate if the expropriation was lawful by reference to whether Venezuela negotiated in good faith against the appropriate standard of compensation, as expressly noted in the 2013 Decision (paragraphs 379, 381).⁷⁸¹

618. Even if Venezuela showed that the finding of the 2013 Decision was an excess of powers, its claim still fails because the excess is not manifest. Both the 2013 Decision and the 2017 Interim Decision recount the Claimants' request that the Tribunal “declare that Venezuela has breached ... Article 6 of the Treaty by unlawfully expropriating ConocoPhillips' investments in Venezuela.” As such, it cannot be argued that the 2013 Decision obviously or clearly contains a manifest excess of power.⁷⁸²

619. Conoco also argues that the Tribunal did not exceed its powers by fixing the date of Award as the valuation date. The decision on the appropriate valuation date was not made ex aequo et bono and Venezuela's arguments (De Jesús) are meritless.⁷⁸³ Venezuela's claims that the Tribunal's failure to apply the valuation date under Article 6 of the BIT or as required under customary international law (Chrozów Factory) are assertions of errors of lawin the interpretation of Article 6 of the BIT and customary international law. However, an annulment application is not an opportunity to reargue points of law, or wrong application of the law. An annulment application should be based on failure to apply the law in toto, not an error in applying the applicable law.⁷⁸⁴

620. In any event, the Tribunal reached the correct result (although it would not matter if it had not). The Tribunal used the date of the Award as the valuation date after

⁷⁸¹ Rejoinder (Conoco), ¶ 177. ↩
⁷⁸² Counter-Memorial (Conoco), ¶ 522. ↩
⁷⁸³ Counter-Memorial (Conoco) ¶¶ 543-548, Rejoinder (Conoco) ¶¶ 187-188. ↩
⁷⁸⁴ Counter-Memorial (Conoco), ¶¶ 525-527; Rejoinder (Conoco), ¶¶ 180, 181. ↩

[Page 205]

considering that (i) the provision of Article 6 of the BIT was silent on the appropriate method to calculate the compensation for unlawful expropriation; (ii) the requirement of customary international law on remedial consequences in the event of an unlawful expropriation; and (iii) that in this case the requirement of “full reparation” under customary international law require a date-of-award taking, since oil prices had increased in the period following the unlawful expropriation.⁷⁸⁵ The Tribunal interpreted Article 6 of the BIT, finding that it did not govern the particular circumstances of this case and turned to customary international law. It is not the Committee's role to assess the correctness of the approach the Tribunal took.⁷⁸⁶ In its Rejoinder, Conoco argues that Venezuela's claim that the Tribunal failed to apply Article 6 in toto when it determined the valuation date based on customary international law misses the mark. Conoco submits that the Tribunal considered the source of law (Article 6) and decided that by its own terms, it did not apply under the circumstances of the case, which does not constitute a failure to apply the law.⁷⁸⁷

621. Conoco further submits that Article 9(3) of the BIT says nothing about the principles governing a finding of a breach of Article 6 and the award of compensation for damages. Even if it were true that Article 9(3) restricted the Tribunal's ability to award damages based on the date of Award, such critique would again be an error of law. Further, as shown by paragraph 90 of the Award, the Tribunal applied Article 9(3) of the BIT: it identified the provision, considered that provision, and dismissed Venezuela's claim that its terms mandated a date-of-taking valuation.⁷⁸⁸ In its Rejoinder Conoco notes that Venezuela fails to engage with the Tribunal's holdings on Article 9(3) and Conoco's submission in the Counter-Memorial.⁷⁸⁹

622. Conoco also submits that it was never its position that, if the expropriation was unlawful sub modo, compensation would be required only on a date-of-taking basis.

⁷⁸⁵ Counter-Memorial (Conoco), ¶ 526; Rejoinder (Conoco), ¶ 182. ↩
⁷⁸⁶ Counter-Memorial (Conoco). ¶ 527. ↩
⁷⁸⁷ Rejoinder (Conoco), ¶ 183. ↩
⁷⁸⁸ Counter-Memorial (Conoco), ¶¶ 529, 530. ↩
⁷⁸⁹ Rejoinder (Conoco), ¶ 184. ↩

[Page 206]

Conoco argues that Venezuela has used truncated quotations from the Claimants' arguments at the 2010 Hearing, to wrongly assert that the Parties agreed on the legal principles relevant to the appropriate valuation date. But there never was an agreement on the date-of-taking valuation, and the Tribunal did not exceed its powers when it ruled as it did.⁷⁹⁰

623. Even if there was such an agreement, that would still not constitute an excess of powers under Article 52(1)(b). For the Tribunal to have manifestly exceeded its powers it must have acted "beyond the limits of its constituent instrument.”⁷⁹¹Conoco submits that the type of party agreement implicated by this annulment ground in an agreement on the applicable law, falling within the scope of Convention Article 42. The fact that the parties might have similar views on the interpretation of the law is not the kind of party agreement that might limit a tribunal's authority to decide an issue in a particular way. Even if the Parties had a common ground for the interpretation of Article 6 of the BIT and customary international law, it would not bind the Tribunal's interpretative powers.⁷⁹²

NO FAILURE TO STATE REASONS

624. Conoco submits that Venezuela's (De Jesús) failure to state reasons argument is meritless. The Tribunal stated its reasons for its finding in the 2013 Decision that Venezuela breached Article 6 of the BIT, but Venezuela disagrees with the reasons. Both Parties presented arguments -and authorities in support- on the question of whether the lawfulness of expropriation by virtue of Venezuela having failed to offer fair market value compensation in good faith. The Tribunal was correct that it was "commonly accepted” that if payment is not made at the outset, an expropriating state must at least engage in good faith negotiation to pay the compensation under the treaty standard. The Tribunal was not, however, required to provide references supporting that proposition, which had already been provided by the Parties.⁷⁹³ Parties have

⁷⁹⁰ Counter-Memorial (Conoco), ¶¶ 531-539. ↩
⁷⁹¹ Counter-Memorial (Conoco), ¶ 541, citing Churchill Annulment Decision, ¶ 239. ↩
⁷⁹² Counter-Memorial (Conoco), ¶ 542. ↩
⁷⁹³ Counter-Memorial (Conoco), ¶¶ 551-554. ↩

[Page 207]

demonstrated their “common acceptance” in respect of the requirements of Article 6 as shown by their positions on Article 6(c), which turned on whether Venezuela had offered fair market value compensation in good faith.⁷⁹⁴

625. In its Rejoinder, Conoco asserts that Venezuela's arguments fail because an inquiry under Article 52(1)(e) is limited to whether reasons exist and can be followed; it is not about the sufficiency of the reasons (i.e., why and how the Tribunal reached certain conclusions). Tribunals are not required to provide reasons for reasons. Besides, contrary to Venezuela's contention, the Tribunal's reasoning can be followed from Point A (Article 6) to point B (the finding that if Venezuela did not pay compensation, it had at least an obligation to negotiate to fix compensation under the Treaty standard). Venezuela may disagree with the decision, but the reasons exist and can be understood.⁷⁹⁵

626. In its Rejoinder, Conoco also replies that Venezuela's (Curtis) argument that the Tribunal failed to provide reasons for its 2013 Decision is inadmissible. In any event, the arguments that the Tribunal did not explain how it concluded that Venezuela did not engage in good faith negotiations and that the 2013 Decision cannot be reconciled with the case record, are arguments that the Tribunal erred in its assessment of the evidence. Such inquiry is outside the scope of annulment.⁷⁹⁶

627. Conoco also submits, contrary to Venezuela (Curtis), that the Tribunal did consider if the Discriminatory Action provisions were relevant to the question of Venezuela's compliance with the duty to negotiate compensation in good faith under the BIT's standard. The Tribunal provided coherent reasons which can be followed and concluded that there was no evidence that the compensation formulas played a role in the negotiations.⁷⁹⁷ On Venezuela's argument that “the Tribunal never explained how it could possibly arrive at the conclusion that Venezuela did not negotiate fair market value in good faith when Conoco Parties themselves had not presented any valuation

⁷⁹⁴ Rejoinder (Conoco), ¶ 194. ↩
⁷⁹⁵ Rejoinder (Conoco), ¶ 196. ↩
⁷⁹⁶ Rejoinder (Conoco), ¶¶ 199, 200. ↩
⁷⁹⁷ Rejoinder (Conoco), ¶¶ 201, 202. ↩

[Page 208]

using the Treaty valuation date to compare with Venezuela's offer”, and “[a]ll of the indicia in the record as to fair market value as of the date of expropriation supported Venezuela's position and negated any notion that there was a lack of good faith negotiation, as well as any notion that Venezuela was not offering fair market value compensation,” Conoco replies these are but disagreements with the Tribunal's reasoning, assessment of the evidence and conclusions and not grounds for annulment.⁷⁹⁸

628. Conoco also argues that the Tribunal did not fail to state reasons in its 2017 Interim Decision reconfirming the 2013 Decision's finding on the breach of Article 6 of the BIT. For Conoco, the Tribunal's explanation of the 2013 Decision's findings is logical and consistent with the 2013 Decision. Venezuela's disagreement with the Tribunal's reasoning does not constitute grounds for annulment.⁷⁹⁹

629. In its Rejoinder, Conoco submits that Venezuela fails to explain how the Tribunal's argument does not satisfy the standard of Article 52(1)(e) (reasoning capable of being followed from Point A to Point B). Besides, Venezuela's critique ignores the evidence that contradicts its position, the Claimants' submissions, and the Tribunal's reasoning regarding the breach of Article 6. According to Conoco, Venezuela's repetitive requests for annulment were not based on the actual reasons provided by the Tribunal in its 2017 Interim Decision, but rather on the assertion that the Tribunal did not spend enough time rebutting Venezuela's arguments. That is a perversion of Article 52(1)(e), which concerns whether reasons exist, not whether they are convincing or as thorough as a party might have wished.⁸⁰⁰

630. Furthermore, Conoco submits that the 2013 Decision and the 2017 Interim Decision are not contradictory. The 2017 Interim Decision explains the meaning of the 2013 Decision's finding that Venezuela “breached its obligation to negotiate in good faith." It was based not on a finding of subjective bad faith, but rather on a finding that

⁷⁹⁸ Rejoinder (Conoco), ¶¶ 203, 204. ↩
⁷⁹⁹ Counter-Memorial (Conoco), ¶¶ 555-564. ↩
⁸⁰⁰ Rejoinder (Conoco), ¶¶ 209-211. ↩

[Page 209]

Venezuela “failed to be involved in negotiations leading to an offer complying with the requirements of 'just compensation' and 'market value”' as required by Article 6. This conclusion was already clear from the dispositif of the 2013 Decision.⁸⁰¹

631. In its Rejoinder, Conoco counters Venezuela's argument that the 2013 and 2017 Decisions are inconsistent because the 2013 Decision found a breach of non-existent obligation, while the 2017 Decision found no breach of such non-existent obligation to negotiate compensation in good faith. This argument, Conoco submits, ignores that the Tribunal consistently found across both Decisions that Venezuela failed to negotiate or offer compensation according to the BIT standard.⁸⁰²

632. Conoco further counters that the Tribunal did not fail to state reasons in its 2017 Interim Decision that Venezuela breached Article 6 of the BIT (failure to negotiate based on fair market value). The Tribunal's decision that Venezuela had not complied with any of the requirements of Article 6(c) and thereby breached Article 6 was correct, and supported by evidence. Conoco submits that the Tribunal considered evidence and arguments presented by both Parties (Embassy cables, the witness testimony of Venezuela's witness and Mr. Goff) but was not persuaded that the evidence demonstrated that Venezuela had offered fair market value compensation. The Tribunal also dismissed the argument that the Claimants' compensation demands were excessive and based on a wrong standard for failure to account for changes in the fiscal regime before the expropriation.⁸⁰³

633. In its Rejoinder, Conoco rebuts Venezuela's allegation that it was “undisputed” that Venezuela was negotiating on fair market value. Conoco refers to conclusions drawn by the Tribunal in its 2017 Interim Decision from facts of the record which showed that the Tribunal had given comprehensible and correct reasoning for its finding that Venezuela failed to negotiate on the basis of fair market value. The records include Mr. Del Pino's September 2007 statement that Venezuela would not pay more than book

⁸⁰¹ Counter-Memorial (Conoco), ¶¶ 565, 566; Rejoinder (Conoco), ¶ 206. ↩
⁸⁰² Rejoinder (Conoco), ¶ 208. ↩
⁸⁰³ Counter-Memorial (Conoco), ¶¶ 567-573; Rejoinder (Conoco), ¶ 212. ↩

[Page 210]

value for Claimants' Projects, Mr. Ramírez February 2008 speech confirming Venezuela would not provide more than book value compensation, Dr. Mommer's admission at the 2016 Hearing that Venezuela did not make a binding compensation offer, and other WikiLeaks cables demonstrating that by September 2008 Venezuela went to its original position to only pay book value.⁸⁰⁴

634. Lastly, Conoco argues that the Tribunal provided reasons for its decision in the Award that the valuation date should be the date of the Award. Venezuela's real complaint, Conoco submits, is that the Tribunal erred in its decision. Conoco explains how the reasons given by the Tribunal in the Award can be followed. Besides, the Tribunal's decision to set the valuation on the date of award is consistent with the Chorzów Factory case and the Tribunal's correct understanding of that case. Chorzów Factory limited the appropriateness of a date-of-taking valuation to cases where the expropriation in question was not carried out in violation of a treaty; whereas in this case, the expropriation was done in violation of the Treaty.⁸⁰⁵ In its Rejoinder, Conoco notes that Venezuela (Curtis) had abandoned this argument as it did not address it in its Reply.⁸⁰⁶

NO SERIOUS DEPARTURE FROM A FUNDAMENTAL RULE OF PROCEDURE

635. Conoco argues that the Tribunal did not breach a fundamental rule of procedure in its 2013 Decision regarding its finding of Venezuela's breach of Article 6 of the BIT. That finding, contrary to Venezuela's contention, was not taken ultra petita. Venezuela was heard on issue of whether it had breached Article 6 by expropriating Claimants' investments and whether it had negotiated fair market value compensation in good faith.⁸⁰⁷

636. Even if Venezuela had been deprived of its right to be heard in 2013 (which it was not), it was heard on the same issues in the context of the 2017 Interim Decision. Venezuela

⁸⁰⁴ Rejoinder (Conoco), ¶¶ 212, 213. ↩
⁸⁰⁵ Counter-Memorial (Conoco), ¶¶ 575-578. ↩
⁸⁰⁶ Rejoinder (Conoco), ¶ 218. ↩
⁸⁰⁷ Counter-Memorial (Conoco), ¶¶ 582, 583; Rejoinder (Conoco), ¶¶ 219, 220. ↩

[Page 211]

was given opportunities during, before and after the August 2016 Hearing to be heard on the issue. There cannot be a serious departure unless the departure leads (or could lead) to a substantially different outcome which would have occurred absent such a breach. Given that the Tribunal heard Venezuela's arguments on this issue and rejected them in the 2017 Interim Decision, there is no basis to claim that any denial of the right to be heard had an impact on the outcome of this case.⁸⁰⁸

637. In its Rejoinder, Conoco notes that it did not mischaracterize Venezuela's argument. Conoco pointed to the references and quotations in its Counter-Memorial demonstrating that the Parties had debated the lawfulness of Venezuela's expropriation based on the evidence in the record regarding compensation negotiations before the 2013 Decision. Even if the Parties had not debated this point, the Tribunal was still free to rule as it did in the 2013 Decision.⁸⁰⁹

638. Conoco also refutes Venezuela's argument that the Tribunal departed from a fundamental rule of procedure by asking the Parties to produce documents that were covered by a confidentiality agreement and exchanged in their settlement discussions between November 2007 and September 2018.⁸¹⁰

639. Conoco alleges that it was Venezuela who put at issue the period covered by the confidentiality agreement. In the context of its reconsideration requests of the 2013 Decision, Venezuela referred to the Embassy cables reporting on settlement discussions from April and May 2008 to support its position that Venezuela had made fair market value offers and that the Claimants had misled the Tribunal. To determine whether the Claimants have mispresented the facts, the Tribunal asked the Parties for the documents exchanged in the compensation negotiations between November 2007 and September 2008.

640. Venezuela also fails to establish that settlement privilege is a fundamental rule of procedure in ICSID arbitration. As observed by the Azurix, Tenaris II and Teinver ad

⁸⁰⁸ Counter-Memorial (Conoco), ¶¶ 582-585; Rejoinder (Conoco), ¶¶ 220(b), 222. ↩
⁸⁰⁹ Rejoinder (Conoco), ¶ 221. ↩
⁸¹⁰ Counter-Memorial (Conoco), ¶ 586. ↩

[Page 212]

hoc committees, Arbitration Rule 34 grants tribunals wide discretion to order the production of evidence and to determine its admissibility.⁸¹¹ In its Rejoinder, Conoco submits that even if the Tribunal's order had ignored the Parties' Confidentiality Agreement, Venezuela has failed to explain how that would violate Convention Article 52(1)(d) or any other procedural rule since Venezuela only refers to settlement privilege, which is not a fundamental rule of procedure.⁸¹² Further, even if settlement privilege were considered a fundamental rule, the Tribunal did not seriously depart from it. Settlement privilege allows for exceptions, and both the abuse of privilege and the waiver exceptions apply in the present case.⁸¹³ Venezuela admits there can be exceptions but disagrees that they apply in this case, yet that debate is irrelevant since it is beyond the Committee's mandate to review the merits of the Tribunal's evidentiary rulings.⁸¹⁴

641. Finally, even if there had been a departure, such departure was not serious and Venezuela has failed to show how the outcome of the arbitration would or could have been different absent the Tribunal's request that Venezuela produce the documents. The Tribunal's conclusion that Venezuela failed to comply with its Treaty obligations did not rely on documents presented by the Parties during the compensation negotiations.⁸¹⁵ Conoco submits that Venezuela's defence that only the Tribunal knows the extent to which the produced documents influenced its decision is an empty assertion and does not meet the standard to annul the Award under Article 52(1)(d).⁸¹⁶

⁸¹¹ Counter-Memorial (Conoco), ¶¶ 594, 595, respectively citing Azurix Annulment Decision, ¶¶ 208–10, 217; and A/CLA-93, Tenaris S.A. and Talta - Trading e Marketing Sociedade Unipessoal Lda. v. Bolivarian Republic of Venezuela, ICSID Case No. ARB/12/23, Decision on Annulment, 28 December 2018, ¶ 89; A/RLA-63 [Curtis] / ARLA-78 [De Jesús], Teinver S.A., Transportes de Cercanías S.A. and Autobuses Urbanos del Sur S.A. v. Argentine Republic, ICSID Case No. ARB/09/1, Decision on Annulment, 29 May 2019, (“Teinver Annulment Decision"), ¶ 199. ↩
⁸¹² Rejoinder (Conoco), ¶ 226. ↩
⁸¹³ Counter-Memorial (Conoco), ¶¶ 598-601; Rejoinder (Conoco), ¶¶ 223(a), (b), 225. ↩
⁸¹⁴ Rejoinder (Conoco), ¶ 228. ↩
⁸¹⁵ Counter-Memorial (Conoco), ¶ 605; Rejoinder (Conoco), ¶ 223(c). ↩
⁸¹⁶ Rejoinder (Conoco), ¶ 229. ↩

[Page 213]

C.1(4) THE COMMITTEE'S ANALYSIS OF THE GROUNDS RELATED TO THE TRIBUNAL'S FINDINGS WITH RESPECT OF ARTICLE 6 OF THE BIT

642. The Committee examines the challenges brought by both Representations of Venezuela (Curtis and De Jesús) against the findings of the Arbitral Tribunal that: (i) expropriation by Venezuela of the ConocoPhillips' interests was done in breach of the Treaty because Venezuela never paid or offered fair market value compensation as required by Article 6(c);⁸¹⁷ (ii) such breach of the Treaty obligation rendered the expropriation unlawful;⁸¹⁸ (iii) the Treaty only sets compensation standards for a lawful compensation while standards for unlawful expropriation are found in customary international law which provides for full compensation;⁸¹⁹and (iv) that full reparation necessitates a valuation of the expropriated assets at the date of the award and not at the date of the expropriation.⁸²⁰

C.1(4)(1) THE COMMITTEE'S ANALYSIS OF THE GROUNDS INVOKED BY VENEZUELA (CURTIS)

643. The same aspects of an award may fall under several grounds of annulment, such as the challenge of the Tribunal's decisions on the legality of expropriation and valuation date. However, the Applicant is mistaken if it believes that annulment could be achieved by compounding the effect of deficiencies because “grounds reinforce each other,"⁸²¹ even when each ground, by itself would not otherwise give rise to annulment.⁸²² Each ground for challenge must be analyzed separately as they raise different problems and need to be addressed independently. That does not preclude that

⁸¹⁷ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶¶ 352, 362, 401, 404(d); A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶¶ 60-63. ↩
⁸¹⁸ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶¶ 153-156. ↩
⁸¹⁹ A/R-1 [Curtis] / A/R-42 [De Jesús], Award, ¶¶ 223-228, 244-247. ↩
⁸²⁰ A/R-2 [Curtis] / A/R-43 [De Jesús], Decision on Jurisdiction and the Merits, ¶ 404(e); Counter-Memorial (Conoco), ¶ 431. ↩
⁸²¹ Tr. Day 2, 52: 4-6. ↩
⁸²² Soufraki Annulment Decision, ¶ 116 (“a series of errors is no more necessarily a ground for annulment than a single error"). ↩

[Page 214]

the Committee from regrouping the challenges into an argument that can be analyzed under more than one ground.

(a) The unlawfulness of the expropriation

MANIFEST EXCESS OF POWERS AND FAILURE TO STATE REASONS

644. How the Tribunal could reach its conclusion on the compensation negotiations is incomprehensible to the Applicant. According to the Applicant, Venezuela made substantial compensation offers under the applicable Treaty standard of fair market value while ConocoPhillips was negotiating on top of the fair market value of the assets and constantly moving the valuation date in an attempt to take advantage of the post-expropriation oil price increases.⁸²³ The Applicant has restated in its submissions before the Committee⁸²⁴ the same facts advanced in the arbitration regarding Venezuela's negotiation offers to prove that the Parties' inability to reach a compensation agreement “was due mainly to the Conoco Parties' insistence on applying the wrong legal standard, disregarding the Fiscal Measures that the Tribunal unanimously found to be perfectly lawful and insisting on constantly increasing their compensation demands in accordance with post-expropriation events rather than accepting the Treaty and customary international law standard of fair market value as of the date of expropriation.”⁸²⁵

645. As ConocoPhillips' remarks are not without pertinence, the Applicant first brought the Committee through the factual allegations and legal arguments that were advanced in the arbitration and rejected by the Tribunal.⁸²⁶ There consist of the Applicant's factual contentions that there is no serious dispute on the substance of the compensation negotiations, Conoco's exaggerated claims on top of the fair market value, and the false accusation of negotiating book value instead of fair market value. The Tribunal's

⁸²³ Memorial (Curtis), ¶ 472; Reply (Curtis), ¶¶ 201, 205. Tr. Day 2, 22: 7-25, 23:1-6, 33:22-25, 34:1-6, 36:19-22, 38:21-25, 39:15-25. ↩
⁸²⁴ Memorial (Curtis), ¶¶ 339-449; Reply (Curtis), ¶¶ 194-216. Tr. Day 2, pp. 20:22-25, 21-48. ↩
⁸²⁵ Memorial (Curtis), footnote 1228. ↩
⁸²⁶ Tr. Day 2, 77:4-7. ↩

[Page 215]

factual findings concerning the negotiations are detailed at paragraphs 94-136 of the 2017 Interim Decision, which the Committee will refers to in the forthcoming discussions.

646. Venezuela argued before the Tribunal that the Parties' offers were not fundamentally different, with evaluations a few months before expropriation in late 2006 at US$ 2.07 billion following Conoco's cash flow methodology of the Upgrading Projects, and at US$2,3 billion by Venezuela in early 2007 after enactment of the nationalization decree.⁸²⁷ The Tribunal explained that Conoco's figures referred to internal valuations prepared in 2006, before nationalization was decreed when only offers had been made to initiate the process of migration of foreign investments into state companies.⁸²⁸ The Tribunal at paragraph 96 recalled the findings in the 2013 Decision that none of the proposals submitted by Venezuela for valuation in August 2006 and January 2007 was based on compensation in a form other than through the acquisition of minority stakes in the state entities to be formed.

647. The Tribunal at paragraph 97 emphasized that a valuation made for a minority holding in a state entity is considerably different from a valuation of the investor's interests held in a company controlled by a majority of foreign investors and enjoying the protection of an investment treaty. The Tribunal in the 2017 Interim Decision further noted that Venezuela admitted the difference between migration and expropriation. One would have therefore expected, according to the Tribunal, (at paragraphs 110 and 111 of its Decision) that the difference between the valuation of compensation for nationalization and for migration to be reflected in the negotiations on expropriation which had been ongoing in 2007; however, this appeared not to be the case in Venezuela's consideration.

648. The Tribunal further explained at paragraphs 111 and 112 that expropriation triggered compensation for the value of the asset and profit over the whole of the remaining life of the projects, and that while Venezuela's insistence on book value or similar lower

⁸²⁷ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶ 76. ↩
⁸²⁸ The migration process was launched in February 2007 (Memorial (Curtis), ¶ 339; Reply (Curtis), ¶ 191). ↩

[Page 216]

value levels had a short-term future in light of possible arbitration claims. At paragraphs 112 of the 2017 Interim Decision, the Tribunal could not find any evidence that Venezuela was considering a shift towards fair market valuation. The Applicant argues that the Tribunal ignored the agreement emerging from testimony on both sides that Venezuela was not walking away from fair market value.⁸²⁹ The truth is that the Tribunal could not find any agreement from its factual assessment of the negotiation history. It instead noted that, as of June toAugust 2007, the Parties were reported to be billions of dollars apart.⁸³⁰

649. In challenging these findings, the Applicant alleges that the Tribunal ignored the fact that Conoco's experts were told to withhold their 2007 valuation from the Tribunal. The Applicant argues before the Committee that ConocoPhillips never submitted a fair market value at the Treaty date of valuation on January 2007 and instead threw around fantasy numbers of US $ 40, 46 or 28 billion, until they were requested at the August 2016 quantum hearing to disclose the valuation prepared for purposes of the arbitration, which revealed figures of US$ 2.477 billion giving effect to the compensation provision, and US$ 5.855 billion without the cap of the compensation provisions.⁸³¹ The Applicant asserts that it is incomprehensible how the Tribunal could find that Venezuela's offers were so far away from fair market value as to render the expropriation unlawful and that the offers of US$ 4 billion and 3.1 billion reported in the Request for Arbitration⁸³² were tantamount to no offer at all.⁸³³

650. Before the Tribunal, Venezuela raised ConocoPhillips' misrepresentations of the relevant facts and information which would have led the Tribunal to decide otherwise in the 2013 Decision that the Republic was not offering compensation based on fair market value, notably because it offered in 2007 five per cent of fair market value indicating a value of US$46 billion (paragraphs 79-80). The Tribunal noted that

⁸²⁹ Tr. Day 2, 30:14-20. ↩
⁸³⁰ A/R-3 [Curtis] / A/R-44 [De Jesús], Interim Decision, ¶ 103. ↩
⁸³¹ Tr. Day 2, pp. 32: 16-22, 44: 21-25, 45, 46: 1-19; Tr. Day 3, pp. 45:21-25, 46-47:1-5. Memorial (Curtis), ¶¶ 379-382, 483-487; Reply (Curtis), ¶¶ 259, 325. ↩
⁸³² A/R-22 [Curtis] / A/R-63 [De Jesús], Claimants' Request for Arbitration, dated 2 November 2007. ↩
⁸³³ Tr. Day 2, pp. 22:19-25, 23: 1-15, 36:19-25, 37: 1-2. Reply (Curtis), ¶¶ 201, 205, 230, 254. ↩

[Page 217]

Venezuela made offers of US$4 billion and US$6.7 billion in the context of an asset swap in June-August 2007 and US$3.1 billion on 2 August 2007 while Conoco claimed US$ 20 billion in August-October 2007 and about US$ 30 billion in September 2008 (paragraphs 103, 105, 128).⁸³⁴ The Tribunal explained that expropriation accounted for Conoco's claim on higher amounts than for migration based on market value including request for forthcoming oil price increases (paragraph 111). Its assessment of the negotiation scene was that Venezuela changed its position from a more market-oriented approach to the original book value or similar lower value levels because the first active steps of the arbitration were looming in September 2008 at the time the negotiations were breaking down and Conoco was not prepared to settle for a much lesser amount than US$30 billion which they were going to claim (paragraph 128). The Tribunal found that Venezuela had failed to provide any convincing evidence in respect of the relevant facts alleged in support of its misrepresentation claims (paragraph 135).

651. The Committee notes that the Applicant's essential argument concerns the fact that the Tribunal could not see that an offer of US$ 4 billion was not unreasonable when ConocoPhillips was not doing a 2007 valuation.⁸³⁵ This will be examined by the Committee bearing in mind the Tribunal's declaration at paragraph 135 of the 2017 Interim Decision that ConocoPhillips' alleged misrepresentations “appears reduced to the simple question whether or not Venezuela had submitted an offer based on fair market value during its negotiations with ConocoPhillips' representatives.” Venezuela contested in the underlying arbitration that never made fair market value offers. The Tribunal noted (at paragraph 120) of the Interim Decision the statements made by Conoco's chief negotiator, whose testimony was relied on heavily by the Applicant to counter the finding that Venezuela insisted on book value during the negotiations,⁸³⁶ that "[w]hile Venezuela is said to accept fair market methodology, the 4 April 2008 cable also says that this observation does not apply to the totality of ConocoPhillips' claims," and the April 2008 Embassy cable was “not always easy to understand.” The

⁸³⁴ See also Memorial (Curtis), ¶ 348. ↩
⁸³⁵ Tr. Day 2, p. 44: 4-10. ↩
⁸³⁶ Reply (Curtis), ¶ 259. Tr. Day 3, pp. 61:10-24, 62-63:1-18. ↩

[Page 218]

Tribunal found that the cable was certainly not as clear as Venezuela argued. While Venezuela's acceptance of fair market methodology is reported in the cable for the expropriated assets, the Tribunal emphasized that the cable did not refer to any proposal or offer actually made on Venezuela's behalf. Furthermore, the May 2008 cable did not report on any offer submitted by Venezuela and neither of these two cables included evidence that Venezuela had submitted any concrete offer based on fair market value. In summary (at paragraphs 121 and 122), the Tribunal found as matters of fact that no evidence had been supplied in support of an allegation that an offer based on fair market values was submitted after November 2007, that Venezuela backtracked to its original position to pay only book value (paragraph 123). These findings of fact should further be read with the Tribunal's understanding (at paragraph 109) that the term ‘book value' was used to describe Venezuela's position that it will object to any compensation based on fair market value as determined by Conoco which is more than one derived through its accounting method of valuation.⁸³⁷

652. An arbitrator's findings of fact are final and immune from review by an ad hoc committee. The Committee has no authority to perform a de novo review of the factual questions or evidential records that have already been assessed by the Tribunal.⁸³⁸ In the same vein, the Committee could not overrule the Tribunal's evaluation of the evidence, including witness testimony, regarding Venezuela's failure to offer compensation on fair market value in the negotiations.⁸³⁹ Notably, the Applicant points to the Committee the cavalier dismissal of the internal valuations made by ConocoPhillips, the confusion of Venezuela's position and offers in connection with the migration process, the Tribunal's ignorance of the closeness of the US$ 2.3 billion March 2007 offer to ConocoPhillips' internal valuations, ignorance of Venezuela's offers of US$ 3.1 and 4 billion, its ignorance of the reasonableness of all Venezuela's offers and ignorance of witness testimony, its failures to appreciate the U.S. Embassy cables as well as factors of major importance relating to the Parties' different